Dr Tee (Ein55)

Summary of Monthly Season Effect on Global Stock Market

Posted on October 3, 2018 Written by Dr Tee (Ein55)

For medium term trading (buy & sell every few months), a stock trader may feel the importance of relative monthly stock performance. If one could apply statistics to understand the months with relative stronger or weaker performance, the knowhow could help in advanced trading plan. Here is a compilation of season effect (monthly stock performance, green is a gain, red is a loss) over the past 12 years on global stock markets in Singapore, US, Hong Kong and China.

1) Singapore (Straits Times Index – STI)

Worst Month: Aug (Losses in 12 out of 12 years)

Best Months: Mar/Apr (Gains in 10 out of 12 years)

2) US (Nasdaq Composite Index – Nasdaq)

Worst Month: Jun (Losses in 8 out of 12 years)

Best Months: Apr/May/July (Gains in 9 out of 12 years)

3) Hong Kong (Hang Seng Index – HSI)

Worst Months: Aug (Losses in 9 out of 12 years), May (Losses in 8 out of 12 years)

Best Month: Apr/July (Gains in 10 out of 12 years)

4) China (Shanghai Composite Index – SSEC)

Worst Months: Apr/Jun (Losses in 7 out of 12 years)

Best Month: Oct (Gains in 9 out of 12 years)

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After comparison, we may conclude the following based on 12 years of monthly stock performance in these 4 global stock markets:

1) Common worst month is Aug for Singapore and Hong Kong; Jun for US and China. The season effect for worst month is regional, not global.

“Sell in May and Go Away” is only observed in Hong Kong with relatively poorer performance in May, not a strong factor for other stock markets. In fact, US has strong record of stock performance in May. So, believe in statistics, not in this myth, unless trading in Hong Kong.

2) Common best month is Apr for Singapore, US and Hong Kong; Oct for China. China is not as aligned as other global stock markets as it has its own unique regional market cycle.

Although May is not the worst performing month but due to relatively stronger performance in Apr, traders could feel the relative change with “poorer” performance in May, therefore believing in selling in May to protect the gains in Apr.

3) Singapore is much more seasonal than other global stock market, very clear in worst (12/12 years in Aug) and best (10/12 years in Mar/Apr) month performance.

STI with 30 component stocks are highly dependent on 3 major local banks (30% of STI), Telco (only left Singtel after Starhub is replaced by Dairy Farm recently), Jardine Group (15% of STI) and property (20% of STI) stocks. Many of them are dividend stocks, announcing final dividends in Q1 (XD in Q2) which could attract potential seasonal buyers, may contribute to better performance in Mar/Apr for Singapore.

Medium term swing trading (buy & sell within a few months) could give better results in general for Singapore stocks with season effect.

4) US is not as seasonal, general trend is upward, more suitable for medium term position trading with buy & hold till the uptrend has ended.

5) Season effect is not strong in China, performance has been quite evenly distributed among the months.

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By right, there is no logic to the season effect on stock market but when there are many believers, it could become a trend. A short term trader should focus more on the unique price pattern in each individual stock of each regional stock market. A long term investor may ignore the monthly season effect, focusing on the growth with capital gains in years.

Learn from Dr Tee through 4hr high quality stock investment course (free for readers) on 10 practical trading and investing strategies with global stock market outlook. Register Here.

Dr Tee Investment Course (Stock, Property, Commodity, Forex, Bond)

Filed Under: Uncategorized Tagged: Season Effect

US Interest Rate Hike to 2.25%

Posted on September 29, 2018 Written by Dr Tee (Ein55)

US interest rate hike US consistently increases the interest rate, latest adjustment is to 2-2.25%. Despite the US and global economy are still bullish, this implies less time remaining for the bull market.

When US interest rate exceeds 3% and/or when 10 years US bond yield is over 4%, investor has to be very careful, especially over the next 12 months for possible black swan which could trigger the next major financial crisis.

It does not mean crisis will come immediately when interest rate is over 3%. It is based on probability approach. Despite higher interest rate now, since stock and property markets are still bullish in US, people are not concerned as they could use higher salary (employee market, currently 3.9% unemployment rate in US), higher profit from stocks/properties to pay for higher inflation or interest/mortgage rates.

A safer way is short term trading/investing, one could leverage on the last phase of bullish market (at least for US) and also prevent the big bear when trend is reversed. However, buy and sell in shorter term may not be suitable for everyone, especially in a volatile market (when VIX is over 20-30 points).

Learn from Dr Tee through free 4hr stock investment course to time for the next global financial crisis through integration of Macroeconomic Analysis (MA), Fundamental Analysis (FA), Business Analysis (BA), Technical Analysis (TA), Personal Analysis (PA) and Optimism Analysis (OA). Register Here.

Filed Under: Uncategorized Tagged: interest rate

Key Learning Summary of Ein55 Business Analysis Course

Posted on September 22, 2018 Written by Dr Tee (Ein55)

Business Analysis Course

The Ein55 students have learned the details of Business Analysis Course #1 from Ein55 Mentor Kean Lim, understanding how to choose a giant stock with strong business fundamental with sound management. Here is the key summary:

Master 4 Steps of Business Analysis Course:

Step 1: Know the company core business:

Business model
Business history
Business diversification
Geographical presence

Step 2: Check whether the business has a durable competitive edge (economic moats)

Intangible Assets – Brands, Patents or Licenses
Consumers’ Switching Costs
Cost Advantage – Process, Location or Unique Asset
Efficient Scale
Network Effect

Step 3: Know the business risk and investment bear case

Company Factors
Industry Factors
Valuation Factors
Market Factors

Step 4: Know the company future growth drivers

(Price x Volume) – Costs = Operating Profit

Higher Price
Higher Volume
Lower Cost

Investing in a company is akin to being in partnership with its business. It is therefore crucial for investors to possess the ability to analyse and make sense of the businesses of interest. The beauty of investment is that one can be selective to only invest in businesses that are profitable and therefore can bring about considerable capital gains in future.

Dr Tee provides free high-quality investment education regularly to the general public, including Business Analysis (BA), Fundamental Analysis (FA), Technical Analysis (TA), Optimism Analysis (OA) and Personal Analysis (PA). The knowledge could help a person for a lifetime, after mastering the right skills of stock investment. Register Here.

Filed Under: Fundamental Analysis, Stock Market Tagged: Business Analysis Course

Impact of US-China Trade War on Stock Market

Posted on September 13, 2018 Written by Dr Tee (Ein55)

China may need to make significant compromise to end the US-China trade war. The worst is once US has the first big bite in Round 2 of negotiation, it might continue to ask for more advantages in future. In fact, US and China have reached agreements a few months ago in Round 1 discussions but it has been forgotten easily.

Should China shows its strength or weakness, this is a Trillion dollar question. It is a mind game as US may not want to end up with lose-lose situation as well, especially mid term election is coming soon. Ideally, US may hope China could be similar to Japan, compromise as a follower for decades.

China has 3 main wild cards:

1) Ability to endure, use Lose-Lose situation to fight back US

2) Financial (Foreign Reserve / US Debt / RMB Depreciation …)

3) Political (International Alliance – BRICS + emerging markets / WTO / 50% opponents of Trump in US / US businesses have significant gains in China market…)

In the current US-China trade war, 50% of the world (except US) is affected. Both China and Hong Kong stock markets are technically bear markets considering stock indices have dropped more than 20% over the past 1 year.

There are 3 main stock strategies for the current market:

1) Momentum trading for US stocks (buy high sell higher)

2) Shorting for stocks with bearish trends (emerging markets)

3) Crisis investing for undervalue stocks (especially China & Hong Kong)

Learn from Dr Tee in high quality 4hr stock investment course to position in current global stock market with 3 stock strategies above during US-China trade war. Register Here.

Filed Under: Uncategorized Tagged: US China Trade War

Leveraging on 3 Key Buyers in Stocks (2 Case Studies on DBS & Venture)

Posted on September 4, 2018 Written by Dr Tee (Ein55)

In a practical investment world, sometimes a stock with strong business may stay undervalue for many years, while another stock with little fundamental but exciting rumors or corporate news, could double in share prices over a few days.

For high probability stock investing, a smart investor or trader would align the decisions (Buy, Hold, Sell, Wait, Shorting) with 3 key buyers in stocks: investor, traders and speculators.

1) Investors (Smart Money)

Smart investors, regardless big funds or retail investors, usually apply Fundamental Analysis to select stocks with strong business (eg. company with wide economic moats with strong and consistent growth in earning, assets, cashflow, dividend, etc), then wait patiently for a reasonable market correction to buy low. Patience is required for this strategy alone. Diversification over a portfolio of stocks is another strategy. Within a short term (weeks) or medium term (months), a strong fundamental stock price may not move up but over a longer term (years), it is more predictable, especially when entry is based on reasonable low price below the value (many types of valuation models are available), protected by a portfolio of stocks, not just 1 stock.

Many investors who have holding power, even buy a stock at sky high price, could still be a winner eventually because the investment is protected by a strong business, time will shows its true strength.

2) Traders (Mass Market)

Smart traders, either professional or amateur, learning to follow the stream of stock prices to move up or down, not only knowing the entry or exit, also know when to cut loss when the market is going against the original setup. Strong emotional control is required within the timeframe of trading (eg. days, weeks, months) to manage the expected gains and potential risks, surrounded by daily market noises (rumors and news). Successful traders also apply position sizing to reduce risk with smaller size, increase potential gain with larger capital when trend is aligned with initial setup.

A smart investor who could integrate trend-following trading into investing, the entry and exit will be smoother, having the best of 2 worlds (fundamental and technical). The probability of success would be higher with leveraging in both investing and trading strategies which form the backbone of stock market.

3) Speculators (Losers / Inconsistent Winners)

We should not be a speculator (eg. follow rumor to buy a stock based on “insider news” with 100% life saving) in stocks but we do need their help to push up the price. A speculator may not be a loser all the time, sometimes they could make some quick money as well but they are inconsistent winner, the actions are similar to gambling because a speculator could throw all the capital with past profits into the next speculative stock without any risk management, potentially could lose everything, similar to a gambler who stay in casino for long term.

A smart investor not only leverages on traders for entry/exit but also making use of speculators to maximize the return with speculation in stock prices, integrating all 3 key buyers in stocks. For example, an investor or trader may sell high to speculators but trend has started to turn bearish with declining volume at peak prices. In fact, speculation is a key contributor to form low optimism (<25% in a bearish market or stock) and high optimism (>75% in a bullish market or stock). For example, China stock market is relatively more volatile and speculative than other global stock markets, therefore even a strong fundamental stock (eg. national banks) could be speculated with cyclic stock prices. At the same time, when a rumor with negative news comes, a stock price could surge 2 times or drop to less than half of the prices within 1 day.

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Integration of Investing, Trading & Speculating

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To maximize the return in a stock with consideration of safety, one may integrate all the 3 key forces in stocks

Investors could help to support a share prices 10% yearly in a gradual way (buy low & hold) while traders could push up another 50% in a few months (Buy High Sell Higher) but speculators could help to multiply any share price (including Bitcoin) by a few times within a few weeks (Buy High & Hope).

When DBS (SGX: D05) or Venture (SGX: V03) was less than $15/share, investors start to Buy & Hold. Traders would consider to buy the same 2 stocks, riding the uptrends from $15 to $30/share with support of bullish stock market (STI) last year. Speculators who collected some tips from free investment seminars or listen to some rumors, also start to enter these stocks from more than $25/share, making peanut return of 10%, when trend is reversed since early 2018, still hold on to the same stocks with falling knifes in prices based on “investing” mindset (enter as a trader for small profit, exit as a long term investor to keep paper loss). In fact, a smart investor and trader, regardless buying at less than $15/share with undervalue price or following from $15 to $25/share with uptrend momentum, they could leverage on speculators to sell high after confirmation of ending in momentum after falling down more than 10-20% from the peak prices.

Are you investing, trading or speculating? Learn from Dr Tee free 4hr stock investing/trading course to integrate these 3 strategies of 3 key buyers in stocks to maximize the return with high probability of winning in stocks, aligned with one personality. Register Below.

Filed Under: Fundamental Analysis, Stock Market Tagged: dbs, dbs bank, Key Buyers in Stocks, venture

Impact of Currency with Hyperinflation on Economy

Posted on August 15, 2018 Written by Dr Tee (Ein55)

If you think Venezuela hyperinflation of 1 million % is a crisis, then Zimbabwe dollar would be a disaster. Political induced crisis of Zimbabwe results in hyperinflation of 79 Billion %, Zimbabwe dollar becomes nearly worthless, a collapse of currency system. The largest note is $100 trillions Zimbabwe dollar which could probably could exchange for just a loaf of bread or just a collector item, becoming a commodity.

The Venezuela crisis remembers me of the Japanese Banana money in Singapore/Malaysia after World War II. Money could become a junk paper but asset such as property still could preserve the value during crisis.

Venezuela highly dependent on income from crude oil which price was falling down since a few years ago, resulting in country financial crisis, which now a humanity crisis with hyperinflation of 1 Million %. For a mature country, a few percentage of inflation is considered healthy for a moderate growth and steady economy but too much inflation will be a disaster. The role of central bank is critical to moderate various factors contribute to national economy.

Inflation is related to purchasing power. 100% inflation, meaning price of a product or service is 2X. 1000% is about 11X.

1 Milllion % inflation means $1 product / service now becomes about $10,001. Technically, the Venezuelan Bolivar, purchasing power with this currency has dropped by 10,001 times.

It means if a loaf of bread is $1, it would cost $10,001 now to get one. So, whoever holds cash as fortune, wealth would drop significantly with very weak purchasing power due to hyperinflation. If one owns commodity or property as wealth, then will be safer.

Lira crisis is Turkey is related to Forex + Politics + Economy, trigger point is different but results could be similar, country financial crisis.

It shows the importance of diversification in one’s wealth, not just invest or keep 1 asset class, eg cash or stock. Property is also a form of commodity, it has certain worth. In ancient time without “money”, one could use commodity/service A to exchange for commodity/service B, paper money is just an easy way to facilitate the exchange. However, there is different level of trust in each type of money in different country, i.e. currency, therefore the knowhow of forex is important, at least knowing which currency to keep.

Singapore may not be a good place to trade in stocks but it could be a good choice to invest in property for long term (island country with limited land and nearly unlimited future population), Singapore Dollar (SGD) also appreciates gradually over the decades against other major currencies under MAS long term policy, supported by long term political stability (the longest so far for 1 party to rule a country), pro-business economic policies, etc.

Remember, currency is only a piece of paper (similar to USD), it has value only because of trust and confidence of users and owners to use it for exchange of product and services. In the past before 1970s, USD was backed by gold, therefore inflation was not an issue. When USD dollar and global currencies are just a piece of paper, then the definition of value would be more complicated. A smart investor would learn to diversify wealth, not just holding to one particular currency. USD, CHF and JPY are considered safe haven currencies, usually demand is higher when global economy is uncertain, eg. since early this year, USD has strengthened against many currencies including SGD.

Currency, inflation, interest rate, stock, bond, commodity, property, economy, or even politics are inter-linked. Learn from Dr Tee free 4 hours investment course to have a holistic view of entire investment markets, understanding their inter-connections.

Filed Under: Uncategorized Tagged: Hyperinflation, Impact of Currency on Economy

Value Trap of Financial Ratios: PE, PB and DY

Posted on August 14, 2018 Written by Dr Tee (Ein55)

Price-Earning Ratio (PE), Price-to-Book Ratio (PB) and Dividend Yield (DY) are 3 common financial ratios which shows relative performance of share prices and business fundamental. A smart stock investor needs to apply these 3 financial ratios with deeper considerations, not just in a generalized way, eg. buying stocks with lower PE, lower PB or higher DY. Do not fall into value trap of stocks for these situations.

1) PE (Price Earning Ratio) = Price / Earning

– PE usually prefers a lower number to show undervalue stock with earning approach. In a practical world, usually outperforming stocks have higher PE as traders willing to pay for higher share price relative to earning. Therefore, investing in lower PE stocks should consider whether the lower ratio is a result of lower price, higher earning or both trends at the same time. Be careful of some crisis stocks which have declining earning with significant drop in share prices, resulting in very low PE. Another potential value trap is sudden surge in earning, resulting in very low PE which may not be sustainable.

2) PB (Price to Book Ratio) = Price / Net Asset Value (NAV)

– PB usually prefers a lower number to show undervalue stock with asset approach. In a practical world, usually outperforming stocks have higher PB as traders willing to pay for higher share price relative to asset. Therefore, investing in lower PB stocks should consider whether the lower ratio is a result of lower price, higher NAV or both trends at the same time. Be careful of some undervalue stocks (PB<1) which have declining NAV with significant drop in share prices, resulting in undervalue stock with more discounts each year. Another potential value trap is quality of NAV on balance sheet may be low (not property nor cash).

3) DY (Dividend Yield) = Dividend / Price

– DY usually prefers a higher number to show higher rate of return in passive income with dividend approach. In a practical world, usually outperforming stocks have lower DY as traders willing to pay for higher share price relative to dividend payment. Therefore, investing in higher DY stocks should consider whether the lower ratio is a result of lower price, higher dividend or both trends at the same time. Be careful of some high yield dividend stocks (DY>10%) which have declining dividend with significant drop in share prices, resulting in high dividend yield. Another potential value trap is company with no free cashflow but still use past saving to pay for dividend yearly which may not be sustainable.

A smart investor should avoid value trap of stocks. Learn from Dr Tee in free 4 hour stock investment course, the right way of applications for PE, PB and DY to look for growth stocks, undervalue stocks and dividend stocks, integrating with Optimism Strategies and Technical Analysis.

Filed Under: Stock Market Tagged: value trap

Trading, Investing or Gambling in Stocks?

Posted on August 10, 2018 Written by Dr Tee (Ein55)

Investing style is similar to one’s personality, sometimes it could be reshaped with lessons learned, but sometimes the habits (good or bad) is like DNA, may last for whole life. So, are you trading, investing or gambling in stocks?

There are pros and cons in each personality, therefore we usually say no one is perfect. Similarly, it is fine to have different styles for stock trading or investing, as long as one practices in the right way aligned to the personality. It is ok to be a short term trader, reacting changes in dynamic stock market, as long as it trend-following, not emotional following with herd mentality. It is also ok to a long term or even life-time investor who may buy a stock and no need to sell for whole life, provided one knows how to establish a portfolio of strong fundamental giant stocks, buying at a market low optimism with regional or global financial crisis.

Most people could learn these positive habits in life or investment, if one is given a chance to learn the right way, then practice on oneself with successes to enhance the confidence, eventually become a new habit or personality. A smoker may quit smoking naturally when knowing the statistics of better health if not smoking. Similarly, healthy diet and exercise regularly are positive habits in life but if one could not have all these good habits, at least could keep whichever positive ones remaining, eg. optimistic mindset, friendliness, etc.

For investing, we don’t have to the best in everything, eg. stocks, properties, forex, bonds, commodity, etc. Even for stocks, we don’t have to know both short term trading and long term investing. Even within investing, we don’t have to master both dividend investing and capital gains. There are hundreds of ways to make money in stocks but one has to master at least one way. This is similar to professions, there are over 1000 different types of jobs and positions, one has to master at least one job to make money.

Some people may not be suitable to trade or invest in stocks due to limitation in personality, especially on some bad habits (eg. following rumors and news to make decisions) but it is never too late to stop “investing” this way which is a gambling in stocks without an edge.

Professional gamblers in casino would not “gamble” (throw dice and wait for luck). Instead, they also apply probability (counting cards, understanding rules of game, capital allocation, etc) in gambling to enhance the chances of winning, knowing when to stop playing, when to bet more, etc. Most gamblers are retail gamblers, which are most welcomed by casino as over the time, they would lose out due to unfair design in casino games. Those professional gamblers may be blacklisted by casinos as it is harder to make money from them, especially from card games.

Are you trading, investing or gambling in stocks? Learn the right path of stock trading and investing from Dr Tee free 4hr investment course.

Filed Under: Personal Analysis Tagged: Gambling in Stocks

Stock Fair Value – Growth Stock & Undervalue Stock

Posted on August 10, 2018 Written by Dr Tee (Ein55)

There are many ways (eg. FA, TA, PA, Optimism) to define a stock fair value or price, depending on the strategies. From only FA (Fundamental Analysis) perspective, there are 2 main strategies:

1) Asset Approach (Undervalue Stocks)

– Buy a stock at price below the good asset value (eg. cash and property), waiting patiently for the recovery of share price, sell when price is above the asset value.

Recent acquisition of Wheelock Properties is a good example. The offer of acquisition requires major shareholder to pay about $600 millions cash. If successful, the company has about $900 millions cash of asset (excluding other assets such as properties), therefore the buyer actually would get $900M – $600M = $300M in return. This is similar to shopping in stock market, paying $6 cash and getting $9 cash in return.

There are 3 major constraints for this strategy:

– Assets should be high quality, in the form of cash or property

– The investor should be patient as the asset owners are usually for longer term investing, could hold the assets for years or even decades at undervalue share price.

– The company should make money with increasing asset value, otherwise the undervalue asset (eg. Price to Book ratio, PB<1) could become a value trap, buy cheap and get cheaper due to declining business.

2) Cashflow Approach (Growth Stocks)

– Buy a stock with business which assets could generate consistent cashflow each year. If the future total cash value, discounted to current value is more than the current stock price, it is a good buy. The Discounted Cashflow (DCF) model is frequently used to evaluate growth stocks.

There are 2 major constraints for this strategy:

– Cashflow generation should be consistent in future for years or even decades, therefore the economic moat should be wide.

– The company could have different growth rates, eg during IPO high-growth stategy, then slower growth, matured business or even declining one day. So, assumption of single growth rate in DCF model may not be reliable.

Optimism strategy is easier to evaluate a stock fair value or price, buying at unfair price, selling when overprice. The Optimism Strategies could be integrated with Fundamental Analysis (FA), Technical Analysis (TA) and Personal Analysis (PA) with Level 1-4 integration (business, sector, country, world) for short term / medium term / long term positioning.

Readers in Singapore may attend 4hr free stock investment course by Dr Tee, learning integrated strategies of Optimism + FA + TA + PA to evaluate a stock fair value.

Filed Under: Fundamental Analysis, Stock Market Tagged: stock fair value

Stock Strategies to Reduce Unsystematic and Systematic Risk

Posted on August 3, 2018 Written by Dr Tee (Ein55)

A smart stock trader or investor has to learn to manage the risks before one could achieve the goals of profit. There are 2 main types of risks for stocks, unsystematic and systematic risk.

1) Unsystematic Risk (Level 1-2)

This risk is related to specific stock/business or an industry/sector. For example, there could be an unexpected business scandal or company having difficulty to pay debt, etc, resulting in major correction in share prices which may not be reversible. Sometimes the scale could be for a specific industry, eg. Unsystematic and oil and gas crisis which affects more stocks with similar type of industry.

In general, diversification of investment portfolio with 10-20 stocks over 3 or more sectors / countries, could help to reduce the unsystematic risk significantly as each stock only contribute to 5-10% of portfolio. As a retail investor, due to lack of time for close monitoring, a portfolio of 10 stocks with strong fundamental in business will be sufficient.

2) Systematic Risk (Level 3-4)

This risk applies to entire stock market, affecting most of the countries, sectors and businesses globally. For example, global financial crisis (subprime crisis in year 2008, dotcom bubble in year 2000, etc) or regional financial crisis (Euro Debt Crisis over the past decade, Asian Financial Crisis in 1997).

In general, diversification could not help to minimize systematic risk since most of the stocks would be affected for this large scale of stock market risk at country or global level.

Instead, a smart investor could apply market optimism strategy to minimize systematic risk through capital allocation in different asset classes. When global stock market is at high optimism (over 75%), one could reduce the risk in stock market through progressive profit taking, converting the stocks into cash as short to medium term opportunity fund. When there is any regional or global financial crisis, the unsystematic risk would become opportunity to buy low.

An all rounded investor would combine these 2 key factors to improve the winning rate in stocks:

1) Formation of stock portfolio with 10 stocks with strong fundamental to reduce unsystematic risk

2) Follow optimism of global stock market to buy low sell high, going against the systematic risk.

The public may learn from Dr Tee 4hr free courses to establish a defensive dream team stock portfolio to reduce unsystematic risk and applications of optimism strategies to minimize systematic risk.

Filed Under: Uncategorized Tagged: Systematic Risk, Unsystematic Risk

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