I have traded about ten S-Chips , mostly when the pennies market was in a frenzy. I am lucky I did okay, but many have suffered, ironically those educated newbies may be worst hit as they are so sure their FA are right. Running a biz is very complex hence an honest, talented and hard working mgt team is essential. Those who own or intend to buy S-Chips should take note of following. No offence intended. Feel free to add on.
1)Sleep with your running shoes on as S-Chips are unpredictable. ie get ready to run.
2)Don’t just use historical data to predict their future ie dividends, gross margins , sales etc
3)Take note of red flags ie rights issues for lousy reasons, insiders selling, no share buyback despite loads of cash etc.
4)Biggest red flag is when major shareholders sell most or all their shares without good reasons, esp those who are also executive senior managers.
5)Don’t trust their quarterly results as they are unaudited. The last quarter is harder to manipulate as final results have to be signed off by external auditors.
6)Don’t blindly follow tips in the forums or investment blogs as the tipsters are amateurs or may have vested interests.
7)Best is to stay away from S-chips, including those Chinese companies listed in Shanghai/HK as poor/corrupt corporate governance are the norm. For yrs, Chinese investors have been burnt like charcoal investing in Shanghai/Shenzhen bourses and will continue to be burnt.
8)Don’t just use financial metrics as their reports can’t be trusted.
9)Using charts to predict their prices is a joke, esp those which are lightly traded.
10)Avoid companies with several family members in management. I avoid them like the plague.
11) Be wary of arrogant/dominant CEOs who are also major shareholders. They are likely to make major decisions on their own without consulting the Mgt team or Board.
12)Check out the background of the CEO and CFO ie education level, experience, track record etc
13)Attend AGMs to gauge the calibre and behavior mgt/IDs, esp the CEO and CFO
14)Be wary if external auditors are small and unknown as even the Big Four are no match for their foxy CEOs.
15)Be wary when they diversify into non-core biz. ie manufacturer going into properties etc.
16)Be wary when the CEO retires and nominate his relative or young son as successor. The CEO is the most important person as he is like a jockey riding/steering a speeding horse.
17)Don’t blindly follow analyst reports as they may be inexperienced or have vested interests. Almost all analysts have not run a biz before. Remember the names of bad analysts and which broking house they are from.
18)Be wary when senior mgt or directors resign suddenly, esp the CEO or CFO
19)Be wary when shares are unbelievably cheap despite great financial metrics as the market is not that inefficient, esp counters which are discussed frequently in public forums ( ie they are no longer “hidden gems” )
20)Always do your own research before buying. And don't be greedy. Take some profits instead of waiting and hoping to multi bag.
There you are, I got them off my chest as I am tired of investors being burnt by S-Chips. My longest post lol. IMHO, S-Chips are unlikely to rebound strongly ever because of their terrible track record. Lastly, hope SGX don’t list anymore Chinese companies and spare ignorant “investors” from parting with their hard earned money. My views only. Not vested in S-Chips.
Here to add on to point No.6 - Don’t blindly follow tips in the forums or investment blogs as the tipsters are amateurs or may have vested interests. These people are fanning the flames of bullishness of S-chip without ever substantiating it. See below:
EXAMPLE 1
* Loaded
* Continue to load.....
* Trying to breakout again
* The best is yet to come!
* Volume suddenly surge again!
* Uptrend intact .....
* Close strongly today. Tmr may be active!
* Volume continue to surge....something brewing...
* Volume Moving ............................ again .....
* On a very solid uptrend ....
* All set to test 50c!!!!
* If 50c is cleared. It should be able to head to 60c easily!
This stock on 6/6/2013 trading at 62.5 cents. Today it is trading down to 19.8 cents.
EXAMPLES 2
* this gem going to surge to 70c soon .....
* load up on this gem now ... 2nd big high speed rail tender to be out this quarter Q4
* THIS GEM IS BEGINNING TO FLY
* nice buying at 49.5c today ... should cross 50c again soon
* the toot toot train is moving off
* it's time to party
* MIDAS steadily rising towards 75cents
* another big contracts should just be round the corner for MIDAS .. to round off with a winning note for MIDAS for 2013
* wait for this gem to fly ...
* Here comes the rally to 75cents
* the train is beginning to move higher again ...
* BUY CHEAP NOW !!!
* just buy ....... anyhow buy anyhow win
* HERE COMES THE MIDAS SURGE
* this gem is oversold already ...... LOAD !
This stock on 12/4/2010 trading at high of $1.13. Since August 2011 this stock never trade above 60 cents. Today it is trading down to 45 cents.
Rock - This is the real world, hence newbies gotta learn fast. We can’t avoid stock market news from mass media , friends, cyberspace etc. The temptation to get rich quick to retire at 40 and the ease of starting online trading or margin accs have dragged in housewives, pensioners , students etc. ( Hmmm, wonder what’s going to happen to us if all doctors, professors, surgeons, engineers etc retire at 40 ? Also, will the children still worship their dads as hard working heroes ?)
I am okay with inexperienced analysts dishing out laughable reports, but dislike smart people who deliberately mislead for vested interests, esp the property blogs which until now still egg on ignorant people to invest in properties. Those who over geared will be hit in few yrs time due to oversupply, plus interest rate hikes. I pray for a soft landing.
Buffett said before we buy a stock, we should look at least 5 to 10 yrs ahead. SGX is small and lacks depth, not like US bourses with their super MNCs like Google, IBM, Coco Cola etc , so I only try to look abt 3 to 5yrs ahead. IMHO, I’d rather avoid property stocks, esp residential developers, as the prolonged low interest rates have escalated property prices globally, so those who venture overseas ( Iskandar, Oz etc ) will also be taking high risks. Their present RNAV will also drop in line with a softer property market in next few yrs. My views only.
" Don't ask a barber if you need a haircut " W Buffett.
Relaxing, it seen that some newbies are not learning. What they want is make fast bucks. Many of them often sold out too early or end out holding onto the junk stocks. I had hightlighted the important of Managing Risks" and "Investment Pitfalls" in the Sound Investment Forum" on 15th August 2013.
A few of us had raised red flags on Eratat few months ago but some newbies blinded by the potential $$$ they will make and keep on loading up.
What happen now!!!
Rock – Agree that risks in the stock market can be managed if we understand them and that many investors don’t until too late. We can learn from W Buffett, who is a master of risk management as he owns large insurance companies . I started late in equities as I was too busy establishing my career, and even then I made mistakes at the beginning. So it’s okay for newbies who made mistakes “investing” in S-Chips as long as they are not fatal. They can learn and come back stronger. But for the stubborn oldbies who never learn, one day they will.
Re Fed tapering as US economy recovers, global interest rates will rise, the quantum will depend on the countries ( eg Turkey etc ). Global currencies will also realign vs USD, esp in emerging economies. IMHO, the SGD is the safest in ASEAN or even Asia. So there will be currency risks when buying properties or overseas shares in emerging economies, or coys with sales mainly in weak currencies. There are also risks of contagion from weaker neighboring countries.
As for me, I am sticking to liquid SGX stocks with stable or visible earnings, and ride out the choppy market as US tapers. So everybody, fasten your seatbelts as it may be a long ride, stay alert but never let the stock market rule your life.
I have learnt heaps about how people think after reading investment forums for few yrs. I have said before, the best investment is to invest on oneself, namely get a good education and constantly upgrade your skills. This will be my last post ( unless a financial crisis strike again) and here’s one of my favorite quote from sifu W Buffett. Good luck everyone.
“ Don’t risk what is important to you, to get what is not important to you “ – W Buffett.
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