Jardine Group and UOB Group with Cross-Holding Stock Network

Ein55 Newsletter No 059 - 2017-03-07 - Jardine Cross Holding

Company A owns Company B. In return, Company B also owns Company A. This is a complex cross-holding of stock network. Let’s learn how smart investors in Jardine Group and UOB Group, using the complex structure to hide their undervalue gem of stock.

Jardine is a giant group of stocks with nearly 200 years of history for Jardine Matheson Holdings, originally from China/Hong Kong, then having dual stock listing in London and Singapore stock exchanges. Ein55 Graduates have already considered Jardine Group of stocks: Jardine Strategic Holdings (SGX: JSH), Jardine Matheson Holdings (SGX: JMH), Jardine Cycle & Carriage (SGXL C07), Hong Kong Land (SGX: H78) last year when their Optimism levels were still low, share prices have gone up more than 20% since then when the market fear has subsided.

There is an interesting history for the cross-holding structure for Jardine group (image source: seekingalpha).  Hong Kong richest person, Mr Li Ka-Shing planned to increase ownership in Hong Kong Land in 1980s, the Jardine group with Keswick family defended their control, forming JSH which owns JMH, in return JMH also owns JSH, very hard for any hostile takeover with this complex share structure.

UOB chairman, Mr Wee Cho Yaw also has a similar cross-holding network of stocks under UOB Group. There is a hidden gem in Wee family stock portfolio.  Ein55 Graduates have learned in the last Charity Course (Discounted Asset Stock) on this special stock.  The stock structure is so complex that undervalued stock could not be seen easily.

Ein55 Newsletter No 059 - 2017-03-07 - Wee Cho Yaw

Normal investors could only buy at fair price because they don’t know how low is considered low for a share price. Traders would buy at high price, following trend to sell at higher price.  Speculators would consider when there is good news with surge of more than 20%, buying at higher price, hoping to sell at highest price.  Due to difference in entry prices, their reward / risk ratio will be different.

Ein55 Graduates have learned to buy giant stocks at unfair price with low optimism.  For long term investors, some even consider low optimism from level 1 (business), level 2 (sector), level 3 (country) to level 4 (world).

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What is Investment?

Ein55 Newsletter No 055 - image - Investment

Investment is to take calculated risk, using special edges (eg. Optimism + FA + TA + PA) to give unfair advantages in winning rate over time, aligning to own personality with independent thinking.

Investment is NOT to copy and paste the methods with stock tips, news and rumours, following herd mentality with hope strategy.

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No one could know what will happen tomorrow. Guessing or hoping is not a reliable strategy for investment. Instead, we should know ourselves first, our unique personality which comprises of many aspects, eg. control of greed and fear, stress management, risk tolerance level, profit target, financial condition, holding power, resources available, etc.

Even if one only masters one weapon, it could give special edge, although it is limited. Eg:

Investor – using FA (Fundamental Analysis) weapon to find strong business
Trader – using TA (Technical Analysis) weapon to ride the trend of prices.

One should bridge between FA & TA:
FA + TA = FATA (发达)

Ideally, we could add 2 more weapons of Optimism + PA (Personal Analysis) to form a personalized strategy for any investment: stock, property, bond, commodity, forex, etc.

4 Critical Actions in Bullish Stock Market

Ein55 Newsletter No 054 - image - Action

There are many people confused, what they should do in the phase2 of bull market. Which action is right? Buy, Hold, Sell, Wait or Shorting?

The answer is dependent on unique personality and condition. In general, we could broadly categorize 4 types of critical actions for 4 groups of traders and investors. Each of them as a gift from heaven:

 

1) Long Term Investor (No Stock)
– best gift from heaven is to wait patiently for global financial crisis, applying low optimism to buy fundamentally strong stocks at lousy price

– intermediate plan is for a long term investor to apply mid-term trading (provided able to match with this personality) to profit from the phase2 of bull market, but the investor must follow trading exit strategy as Optimism is high.

 

2) Long Term Investor (with Stocks)
– examine the past entry price, was it low optimism? If yes, hold during intermediate optimism (with consideration of L2-L4 signals), prepare to take profit when optimism is high. Ein55 Graduates have learned many techniques to integrate trading into investing to maximize the gains.

– after selling the stocks one day, move to Group1 for next action.

 

3) Short Term Trader (No Stock)
– 2 possible strategies, 1) buy low sell high (swing trading) which requires a minor correction, 2) buy high sell higher (position trading) with momentum trading or breakout strategy, entering when a critical resistance is broken upward.

 

4) Short Term Trader (with Stocks)
– hold and take profit using quicker signal, different price target as Group 2.

– after exit, the buy/sell process could be repeated many times until the bull run has ended one day, then applying reversed strategy of shorting to profit from bearish market one day. Trend follower for short term trader.

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In summary, there is no one solution, one could make money with any action aligning to one’s personality: Buy, Hold, Sell, Wait or Shorting. If there is a mismatch in personality with strategy, then any action could result in losses eventually. So, we should know ourselves first before planning for stock trading or investing. Actual personality is much more complicated, each one of us is unique but the 4 types above are the most common ones: trader vs investor, with and without stocks.

We need to take action to convert knowledge into fortune. It has to be the right action at right time, aligning to our unique personality.

New Ein55 Investment Style 2017: Frog Cooking Theory

Ein55 Newsletter No 048 - image - Frog Cooking Theory

 

Although both were/are at historical peak stock prices with high optimism, there is a key difference between bullish stock markets of China SSEC (Year 2015) and US S&P and DJI (Jan 2017).  The chart below shows that the rate of index growth is much faster for China SSEC, therefore the high optimism was not sustainable, going up and coming down within months. US stock market is a gradual warming process, although feverish, it is more sustainable.

We may have heard the story of a frog swims comfortably in warm water, could be killed unknowingly when the water is heated up gradually. A frog could adjust the body resistance to temperature change, but there is a limit for the tolerance, eventually it will get killed if the water temperature is too high because it is so used to the environment, does not know how to jump out of the danger.

Sounds familiar to those in the stock market? If a stock trader or investor behaves like a frog, adjusting to the cooling water (i.e. stock market correction) and warm water (i.e. stock market rally), mild bearish or mild bullish market, but eventually when stock market hits extreme high optimism, one may not know how to escape when the market melts down, not able to react fast enough as they may not feel the risks when stock market prices grow up gradually.

The US stock market has been bullish recently, leading the global stock markets in the same direction, ideal for short term traders to buy high sell higher.  Dow Jones Index is above the critical 20,000 points, which could be the next future support over the time, while S&P 500 is near to the next milestone of 2300 points.  As long as the water temperature of stock market is heated gradually, best with some cooling in between, the “frogs” could still be safe for a prolonged period of time until a Black Swan swims in one day, then the unprepared traders or even investors, could be caught by surprise, may not know this will be a real crisis.

Ein55 Newsletter No 048 - image - Indices Growth Rates

You could call this as a new Ein55 style but since Dr Tee already has established 55 Investment Styles, I won’t give a new number, eg. #56. You may know the reason if you have attended my free courses to the public before.  This investing concept was already integrated into Optimism Strategies, it is just I did not label with a style in the past. We need to monitor the rate of change in Optimism which is different from Technical Analysis which focuses only on stock prices.  Ein55 Investment styles are usually generalized concepts with interesting stories, helping learners to apply the methods easily in daily life experience of investment markets.

How to Profit 70% from Acquisition of ARA Asset Management Stock by Li Ka-Shing?

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ARA Asset Management (SGX: D1R) is one of the Top-20 giant stocks in Singapore, based on Optimism Strategies with consideration of FA (Fundamental Analysis), TA (Technical Analysis) and PA (Personal Analysis).  Let’s learn how to grab the next opportunities following similar approach, taking action ahead of the potential big bunds.

ARA is a REIT manager with consistent earning, major shareholders are John Lim (CEO), Cheung Kong (Li Ka-Shing) and Straits Trading.  Due to the weak property market outlook, the stock price has been declining in the past 3 years from high optimism (over 75%) to low optimism (below 25%), creating a rare opportunity for potential investors who could identify the hidden treasure and wait patiently for the acquisition or recovery in share price.

ARA share price was falling below $1.10, considered low optimism, suitable for investor to buy low again.  There is no surprise when the major shareholders have decided to offer to acquire ARA recently as they know the true value of their own business.  As a result, ARA share price is approaching offer price of $1.78/share, gain of 70% over the last 1 year.

 

ein55-newsletter-no-046-image-ara-optimism

We should learn to find the other Top 20 Giant stocks in Singapore with high value, buying at discounted price at low optimism, ahead of other potential big buyers who are also looking for these cash cows.  Investment clock is very critical to profit consistently from stock market.

Most people may think Singapore stock market is stagnant but actually it is a good time for big funds to acquire good business at low price. If we can understand the mindset of big funds who are value investors, taking actions before them, then there is no surprise of the big gains in short time with the acquisition.  Earlier successes by Ein55 Graduates were SMRT, Sim Lian, CM Pacific and Super Group, all are value or growth stocks acquired so far.

 

4 Seasons of Investing with Optimism Strategies

ein55-newsletter-no-042-image-4-seasons-tree

There are three schools of thought to achieve the best of both worlds in stock trading and investing. To bridge these three schools of thought, i.e. Fundamental Analysis (FA: business and economic performance), Technical Analysis (TA: price movement) and Personal Analysis (PA: emotional management), I have formulated the Optimism Strategies.

The essence of the optimism strategies is to identify fundamentally strong stocks, and buy/sell at a time aligned with technical analysis indicators, matching our personalities to take the right actions: Buy, Hold, Sell, Wait, Short.

It may seem hard to practise the above when pessimism is looming over the markets, but as investors, we all need a bit of optimism.

To make things simpler, I measure optimism on a 0 to 100% scale, where 0% stands for fearfulness or extreme pessimism, and 100% stands for greed or extreme optimism.

The general aim of investors is to find the best time for entry or exit by applying the Optimism Strategy at four different levels: Level 1 – individual stocks, Level 2 – sector/ industry, Level 3 – country/region, and Level 4 – world.

However, most undisciplined retail investors would simply follow the herd mentality—buying when everyone is buying and selling when everyone is selling. But again, these people usually end up buying high and selling low, and thus losing in investment.

 

Don’t be Thrown Off by the Word “Crisis”

I think a very important part of being optimistic is to not be afraid of crises, and not be distracted by “what everyone is saying”, because every crisis presents an opportunity.

If we were to observe how frequently crises occur, we will find that Level-1 crises happen almost all the time. Wind ups happen for weak companies when the earnings, assets, and/or cash flow are insufficient to pay for the debt. This could happen very unexpectedly; such was the case for Swiber.

Level-2 crises tend to follow the market cycle of the particular sector, for example oil & gas, casino, etc. But that also means that opportunities can be found every few months.

Level-3 crisis could happen every year, e.g. the US losing AAA credit rating (2011), China stock crisis (2015), Brexit crisis (2016), etc.

Level-4 crisis is even bigger in scale, but less frequent as well. Picture the Dotcom Bubble (2001) and Subprime Crisis (2008).

The above sound scary, don’t they? But I think that the greatest investment opportunities lie in the most fearful and most unexpected financial crises. This brings me to the next point.

 

The 4 Seasons of Investing

Of course, I don’t mean seasons in the literal sense, neither am I referring to the quarters in a year.

I use seasons as an analogy to describe market optimism. Winter is cold and seemingly lifeless, so I use it to represent a time/period when investors’ interest is very low (Optimism < 25%).

Summer, on the other hand, is hot and vibrant. I use it to represent a time when investors’ interest is high (Optimism > 75%).

Spring and autumn are seasons with milder climates, thus these two seasons refer to times when investors’ interest is average.

Needless to say, seasons come in cycles. Knowing that the market neither prospers nor stagnates forever, our aim is to enter investment in “winter” (when others are fearful), and exit in “summer” (when others are greedy).

Based on the concept of the four seasons, I have formulated a strategy to pick the optimum times of entering or exiting the market, as depicted in the diagram below:

ein55-newsletter-no-042-image-4-seasons-of-investing

If  you are unsure about what this diagram means, I will be giving a more detailed breakdown of the approach investors can take in my free investment course.

If you’re interested to learn more, you may stay tune to my upcoming articles in this space or even attend a free investment course where I would explain the concepts more in-depth. During the free 3hr high-quality short course to the public, I will also share about 5 out of my 55 investment styles. Click on the button below to find out more about the latest upcoming workshop.

Dr Tee: Successful Trading & Investing with FTP Analysis in Optimism Strategies

Ein55 Newsletter No 037 - image - Taiji

First things first, what kind of investor would you describe yourself as? Conventionally, we classify investors into two groups—long-term and short-term.

Long-term investors also tend to identify as value investors, who typically base their decisions on Fundamental Analysis (FA). In other words, they are not so into day-to-day trading, or watching stock charts closely as stock prices go up and down. Instead, they prefer to read company reports and seek stocks which they believe are trading for less than their intrinsic values.

Short-term investors…well, it is still debatable whether short-term trading can be called investing, but we know that it’s a much faster game with less waiting time, but more technicalities or Technical Analysis (TA) involved.

So, quick, choose one between the two, which type are you? It’s hard to stick completely to one choice, isn’t it?

Each side has its limitations!

I too would find it hard to just pick one and leave the other one out entirely, because I don’t believe that the two investing styles should be mutually exclusive.

In fact, each style comes with its own set of blind spots and shortcomings.

For instance, one could still lose money by buying a fundamentally-strong stock at a sky-high price.

In the case of short-term trading, it might easily turn into over trading, i.e. excessive buying and selling to increase the probability of successful trades. Such gambling behaviour, coupled with a lack of discipline, could cost investors heavy losses.

Therefore, I think it is advisable and even important to make use of both FA and TA, to enjoy the “best of both worlds”, and in other words, buying giant stocks at cheap prices and at the right time.

On top of that, the investor would also need to develop a kind of inner discipline. Thus, I would like to add another school of thought—personal analysis (PA) as well.

I have integrated 3 schools of thought: FA+TA+PA (FTP analysis) through the unique Optimism Strategies.

 

Ein55 Newsletter No 037 - image - FTP

More about FTP Analysis

People who are new to investment may ask the question, “So what is FA, TA, or PA? What can I expect to learn under each category?”

This is how I look at it.

When it comes to Fundamental Analysis (FA), it is more than just assessing a company’s business performance or intrinsic value (though that will be covered as well). We should also have an understanding of the macro economy (e.g. how countries/ economies are doing on the whole) as well as microeconomics concepts (e.g. demand and supply). I believe that the stock market and the economy are related like how the teeth are related to the lips—without the lips, the teeth will feel chilly.

As for Technical Analysis (TA), ideally we want to buy low and sell high, but it is not that straightforward. In order to enter and exit markets at the right timings, we need to look into trade volumes, values, patterns, trends, etc. I will also be sharing key points that include: relative and absolute technical analysis, as well as bull and bear market interpretation.

Personal Analysis (PA) is essentially a study of 4P: Investor Psychology, Political Economy, Winning Probability and Personal Indicators. It might be the most overlooked part, though I feel that it can even be more important than FA and TA sometimes. Market forces may be uncontrollable and unpredictable, but we can overcome our own emotions and also form personalized investing strategies.

How do we connect these three schools of thought together then? Having been an investor for 20 years myself, I think it can be summed up in one sentence: Identify strong FA stocks, and buy/sell at a time aligned with TA indicators, as confirmed by PA.

The unique Optimism Strategy developed by Dr Tee provides a special advantage to know which investment (stock, forex, property, commodity, bond, etc) to buy safely, when to buy, when to sell, including option of long term holding.  So far over 10,000 audience have benefited from Dr Tee high quality free courses to the public.  Take action now to invest in your financial knowledge, starting your journey towards financial freedom.

 

How to Pay $50 to Exchange for $100 in Hongkong Land?

We could apply discounted asset strategy to buy good business at undervalue price.  One simple method is to buy strong property stocks with low Price-to-Book ratio (share price divided by net asset value).  Hongkong Land (H78.SI) is a property stock listed in Singapore with commercial properties in Hong Kong, Singapore and China.  Currently Price-to-Book ratio is exactly 0.5, at its historical low (see chart below), owing to falling share price and consistent growing net asset value.  If an investor owns Hongkong Land at current share price (about US$6), it is as good as owning a portion of Hongkong Land properties at 50% discount. This is a combination of value investing (buying at discount) and growth investing (company with growing business, share price went up 8 times over the past 15 years).

However, a trader or investor needs to apply optimism strategies to know the investment clock, when to buy and sell Hongkong Land.  Due to cooling measures of property in Hong Kong and Singapore with slowdown in economy, the market sentiment has corrected Hongkong Land to 26% Optimism.  It means the stock has 26% downside and 74% upside from long term perspective, Reward to Risk Ratio (RRR) nearly 3 to 1.  Optimism is a probability calculator, we could know the chances for trading or investing in short term, mid term and long term.

Ein55 Newsletter No 029 - image - Hongkong Land

Currently Hongkong Land is under both Level 2 crisis (bearish Singapore property market) and Level 3 crisis (Hong Kong Hang Seng Index at low optimism), suitable for medium term trading but technical analysis should be applied before entry.  For long term investing, this stock may be considered during Level 4 crisis (global financial crisis) one day when optimism of world stock indices are low.

Opportunity in Best Bank Stock in Malaysia – Public Bank

Ein55 Newsletter No 027 - image - Public Bank Photo

Due to slowdown in economy in Malaysia, combined with Oil & Gas crisis and falling of Ringgit currency, many giant stocks in Malaysia are at attractive low price.  Public Bank (1295.KL) is a growing bank in Malaysia, share price went up 5 times from $4 to $20 in the last 15 years while earning per share (EPS) went up about 3 times consistently over the same period with strong ROE (see chart below).

Following traditional value investing principle, it is hard to buy growing stocks below the intrinsic values, unless there is a major market crisis.  Public Bank share price has been stable in the last few years but Ein55 Optimism has dropped to 24% while the earning is still growing steadily.  It means the stock has 24% downside and 76% upside.  Ein55 Optimism is a probability calculator, no one could know the future, but we may use knowledge of probability wisely to protect our investment.

Ein55 Newsletter No 027 - image - Public Bank Optimism

While waiting for the giant stock to recover, the Public Bank pays about 3% dividend yearly to shareholders, which is comparable or better than interest rate of fixed deposit in bank which has no capital appreciation.  One should learn to take calculated risk, investing in bank stocks (as a partner of bank), instead of lending money as cheap loan to bank (as a customer of bank), because the difference in long term investment return is tremendous: average of 15% yearly return in stock investment vs 3% yearly return in fixed deposit return.

Investment in good bank stocks are suitable for longer term investors who have holding power of a few years.  At the moment, Public Bank is an opportunity with Level-2 (sector) crisis.  If one could wait even more patiently, Level-3 (country) and Level-4 (global) crisis is even a better time to buy Public Bank and other giant stocks globally.  Ein55 Optimism investing strategies developed by Dr Tee will help to grab these golden opportunities in future.

Ein55 Newsletter No 027 - image - SGD-MYR Optimism

There is additional advantage for Singaporeans to invest in Malaysia stock market from forex perspective.  SGD vs Ringgit has reached a new high of 3.0 in the past 1 year, this is the second weakest time of Ringgit in the past 20 years (since Asian Financial Crisis in 1997, see forex optimism chart above). This implies that Ringgit has higher potential to grow. If one could buy a Malaysian giant stock at low optimism, holding until high optimism of stock price one day, likely the Ringgit will be stronger at that time.  We could have double advantages, enjoying higher potential upsides of both low optimism of Malaysian stocks and low optimism of Ringgit (high Optimism of SGD).

We should learn to find the top 10 global bank stocks with excellent business for our investment portfolio, buying at discounted price at low optimism, ahead of other potential big buyers who are also looking for these valuable assets.  Certain Bank stocks could be in crisis when there is global economy slowdown with high debt.  Therefore, we should only consider giant Bank stocks with strong fundamentals, not just any stock with price discount, buy low and sell high or hold patiently for both capital appreciation and passive income.

Stock & ETF Investing Opportunity in BRICS – Emerging Countries

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Due to global economy slowdown in the last few years, stock markets in the emerging countries have suffered significant corrections, resulting in Level-3 (country/region) crisis.  The leaders of emerging countries are BRICS (Brazil, Russia, India, China & South Africa), stock prices are now at very attractive prices.  When the global economy starts to recover and accelerate, these emerging stock markets will benefit as well.  One could use ETF to trade or invest global stock indices.

Due to economy and political instability, Brazil stock market now is at 18% Optimism, after 57% correction in stock prices (see chart below).

Ein55 Newsletter No 026 - image - Brazil

Russia has suffered from falling in global oil price, economy is severely affected. Russia stock market now is at 16% Optimism, after 65% correction in stock prices (see chart below).

Ein55 Newsletter No 026 - image - Russia

India is relatively stronger compared to other BRICS, stock market now is at 34% Optimism with only 13% correction in stock prices (see chart below).

Ein55 Newsletter No 026 - image - India

China is world No 2 economy, although Optimism is similar to India at 34%, stock prices have heavily corrected by 43% after the last round of speculative bull run, falling down from peak of 5200 points (see chart below).

Ein55 Newsletter No 026 - image - China

South Africa is relatively smaller in economy size, Optimism now is at ideal 25% Optimism with only 20% correction in stock market (see chart below).

Ein55 Newsletter No 026 - image - South Africa

The level-3 crisis and opportunity mentioned above requires longer investing strategy because global economy recovery is a gradual and longer term. Political economy is also crucial for the recovery of stock markets.  BRICS have to compete with US which is now at moderate high Optimism of 68% (see chart below) with more bullish economy, challenging the next historical peak in stock prices.

Ein55 Newsletter No 026 - image - US

If there is still a last global rally in stocks, BRICS may recover strongly with US stock market may rise to new historical high.  Other smaller emerging countries stock markets (eg. Southeast Asia) and many individual stocks may follow BRICS as well. However, after the next bull run, there could be another perfect storm waiting ahead, level 4 global financial crisis may severely injured all the global stock markets, both US and emerging counties. The ability to know when to sell to take profit will be crucial.