Sunday, 24 August 2014

What methods had I used

Come to think of it, I have been seriously investing since 2011. Although my first share purchase was done back in 2007, a few lots of Thai Beverage, which would not count as proper investment as there was no share analysis and business model study. It was more of a speculation.

Over past couple of years I have bought shares based on different investment strategies, including net assets play, growth stocks, dividend counters, swing trading based on basic technical analysis such as MA, support and resistance levels. There had been varying degree of success with these strategies.
Let me start off with some that had not worked so well for me. I bought Power Matic Data on ground that its price was below its NAV, or the Net-Net method popularised by Ben Graham. These shares are usually illiquid, unheard-of companies. So the bid-ask spread was very large. My order was partially filled on the first day, and I continued queuing for the next 3 weeks to no avail. The share price would also gap up or down randomly. As I could not accumulate a sizeable amount of shares, I decided to sell it at a small profit. Again the large bid-ask spread brought me some difficulty in selling over few weeks.

For asset play, one must be ready to hold on to the counter in wait of its share price to rise to the NAV. It could take months or years. It would be more fruitful if one can be sure of potential price catalyst not far down the road such that the wait wont be too long. Also, I disliked the difficulty in selling or buying due to the large spread. It makes a transaction a long-drawn process. Hence this strategy might not be suitable for me.

Dividend counters. My preference in this area would be cold stocks with little analyst coverage that have stable business, relatively strong balance sheet, with good history of dividend payout. Dividend yield should preferably above 7%. Growing revenue would be a big plus. I think these shares that are not well known allow me to enter at a cheap price. So long as the business remains profitable, chances are it will come to investors’ alert and price will rise. Although I invest in these shares mainly for the dividends, substantial capital appreciation usually follows and these are good bonus to have. Tai Sin and Lum Chang are good examples.

It is also important to pool all the dividends together, and reinvest them in the same, or new dividend shares.

My best experience so far has been with companies that showed stable and manageable growth trends in past few years, with little debts. And they are usually mid/small cap. These are the stable and hardworking companies that are quietly chugging along, with constantly growing quarterly profits. Better still if the company has concrete plans to grow its business using similar strategies proven in earlier expansion drive. This will sustain the growth, and in turn, the rise of share price, which may not shoot up over night or weeks, but will gradually rise in a gentle slope without you noticing. My stock in this area would be Riverstone.

As for my experience in share purchase using technical indicators. It is definitely bad. Overall, I am still positive from these trades, but results are erratic with big wins and numerous small loss. Usually I would earn some kopi money from a trade, and the next one will lose 80% of the amount. I adhered to guidelines on MA, spike in price with high volume after base pattern formation, resistance/support level. And even a strict 10% cut loss rule. But market never fail to surprise me. Decision had often seem wrong as price rose after cut loss, or rose further after sale such as Super Group, Noble or Sakari Resources.

Think technical trades are just not my thing and I should stop doing it completely. Even for small amount of punting. 

1 comment:

  1. Looks like you have experienced most of the investing strategies and found those that works and doesn't (for you). Which is cool! Keep going...


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