In previous post, i describe about warrant, but please bear in mind call warrant is different with warrant.
For a warrant, it can be converted to mothershare at anytime before the expire date. To convert it take about 10 days. While for call warrant, it cannot be converted at anytime, instead, you will get back the value of the warrant upon maturity. In another word, the call warrant have a mature date, on this day, the call warrant will be stopped from trading, and the company will give you the money of how much the call warrant worth.
To deferential call warrant & warrant is to read the name or symbol. Mothershare's symbol + WA/WB/WC is ordinary warrant & is convertible. Call warrant have CA/CB with the mother share's name. Example : YTLPOWER-WB, ANNJOO-WA are convertible warrant while MAYBANK-CJ & PBBANK-CJ are call warrant.
Here i give an example : Today, ABC is trading at RM 5 and is call warrant is at RM 1 with excersise price of RM 5 & will be matrued in 1 year. Mr A bought ABC-CJ at RM 1 but he cannot convert the warrant. Upon the maturity - Case 1: ABC trading at RM6, the call warrant worth RM 1(refer my previous post to know how to calculate the value). In this case, company ABC pay Mr A RM 1.
Case 2 : ABC trading at RM 10, ABC-CJ worth RM6. Company ABC pay Mr. A RM6
Case 3: ABC trading at RM 5, ABC-CJ worth exactly RM 0, Mr.A get back nothing and loss everything from his investment.
The concept is just the same with convertible warrant, just it is not convertible and somebody have to hold it and wait until maturity date.
I bought PBBANK-CJ at 0.385 and now it is trading at 0.62, say if tomorrow is the maturity day and today close at 0.62. So Public Bank will have to pay me RM0.62/unit of PBBANK-CJ i own. But if the PBBANK-CJ is a WB ( if it is a convertible warrant instead of a call warrant) i'll have to convert the warrant to mothershare if i can't sell it.
Sunday, July 19, 2009
Friday, July 17, 2009
Inflation is perhaps the word everyone must understand
To let all the readers understand more about inflation, here i write another post in case some feel boring to read the share investment stuff.
Try to change from another (than my previous post) point of view, inflation also means the value of your money decreasing. Which means, on tomorow, your money is going to be cheaper than today's value. It is difficult to understand how money can be cheaper, lets see this scenario. The money you are holding today just like a hi-tech stuff(handphone, cool laptop, mp3 player, PSP.......) Today, an iPhones costs you $199, years later it will only be selling at, say $99. You bought your laptop at 3500 bucks years earlier, but today the 1 selling at 1999 is actually better than yours. The RM 55-8GB pendrive is actually cheaper than the 128 MB pendrive when it was launched( around RM100). It is just the same to the money, just not that significant.
Thus, cash is the all-time-worst asset to buy (unless there is a deflationary economy depression, which is short-lasting) People with their networth consists mostly cash is getting poorer & poorer. So we have to found alternative, the first one is the fixed deposit, FD you bought from bank. I always like to tell my friend a case: " you earn 10 bucks today & the Starbucks tall cappuccino is selling at RM10. You have a fair financial sense, you keep your 10 bucks in FD. Years later you cash-out the FD at RM 15, you go to Starbucks, & the Tall Cappuccino is selling at RM15" In this case, FD is just an instrument for you to park your money in case you have no idea on other alternative. FD is just like refrigerator, it keep the value of your money so that whenever time in the future you cash-out your money, your still can buy 1 tall cappuccino.
Other alternative which is better than FD is like your EPF, gold, wine, and others. If you are not a investors in share market or real estate market, it is still not advisable for you to have cash as the majority part of your networth, try consider gold or conservative investment(like utility business i mentioned)
"Cash is just like a pendrive, it is getting cheaper & cheaper"
Try to change from another (than my previous post) point of view, inflation also means the value of your money decreasing. Which means, on tomorow, your money is going to be cheaper than today's value. It is difficult to understand how money can be cheaper, lets see this scenario. The money you are holding today just like a hi-tech stuff(handphone, cool laptop, mp3 player, PSP.......) Today, an iPhones costs you $199, years later it will only be selling at, say $99. You bought your laptop at 3500 bucks years earlier, but today the 1 selling at 1999 is actually better than yours. The RM 55-8GB pendrive is actually cheaper than the 128 MB pendrive when it was launched( around RM100). It is just the same to the money, just not that significant.
Thus, cash is the all-time-worst asset to buy (unless there is a deflationary economy depression, which is short-lasting) People with their networth consists mostly cash is getting poorer & poorer. So we have to found alternative, the first one is the fixed deposit, FD you bought from bank. I always like to tell my friend a case: " you earn 10 bucks today & the Starbucks tall cappuccino is selling at RM10. You have a fair financial sense, you keep your 10 bucks in FD. Years later you cash-out the FD at RM 15, you go to Starbucks, & the Tall Cappuccino is selling at RM15" In this case, FD is just an instrument for you to park your money in case you have no idea on other alternative. FD is just like refrigerator, it keep the value of your money so that whenever time in the future you cash-out your money, your still can buy 1 tall cappuccino.
Other alternative which is better than FD is like your EPF, gold, wine, and others. If you are not a investors in share market or real estate market, it is still not advisable for you to have cash as the majority part of your networth, try consider gold or conservative investment(like utility business i mentioned)
"Cash is just like a pendrive, it is getting cheaper & cheaper"
Wednesday, July 15, 2009
Why we have to invest? Mr.Inflation say yes
Street people cry for inflation, but wall street people laugh for it. Ever complain about the rising fuel price and yet unable to do anything? Do you feel the food you eat and the restaurant you always visit becoming more & more expensive? That is the "pressure" of inflation. Why i use quotation mark on"pressure" because there are only some people hate it but some other love it.
There is no need for me to explain what is inflation and why inflation make people cry. Lets see why people laugh for it.
As inflation means everything increase in its price, investors who invest in those commodities that get price appreciation will also experience an inflated value of asset or networth. Investors who invest in oil & gas related companies or directly invest in oil & gas commodity will get handsome profit from the increase in crude oil price. However, high crude oil price cause fuel price have to be adjusted to the suitable & higher level which eventually transfer the burden to the consumer. Both the investors & non-investors are the consumer of petrol. But once the petrol/crude oil price increase in value, O&G investor gain handsome profit and the profit is well enough for them to pump years of expensive petrol compared to non-investors have to feel the pain of hi-fuel price.
Besides our everyday petrol, inflation make everything expensive, which ranged from construction steel to dairy product. Manufacturers smile for it as their product can be sold out at a higher price (provided that the cost of raw material do not increase faster than the products) For example, palm oil producers expecting handsome profit from the rising crude palm oil price and steel manufacturers happy with the higher steel price, while the company buying those products can easily pass the hi-priced to end-consumer, consumers, especially the non-investors will eventually be the victim.
Real estate is the same, development projects, increasing population & property demand or mere speculative trading activities make real estate price ever increasing. Who non-investors, owning a house become harder & harder. Low to medium-end people who are planning to buy a house will feel getting 1 is never been easy, cause as the income increase, their dream house price is also inflating. At another side, real estate investors become richer & richer, buying a property become easier & easier.
Thus, my advice is invest in financial asset or even tangible asset which will be benefited from the inflation. For example, buying O&G related company, the return will be good if the international crude oil price increase. You will feel that your networth is actually unaffected by the inflation, if not increase at a rate faster than the inflation rate. As mentioned in my KNM post, the return from investing in KNM is well enough for me to pump years of expensive fuel.
Besides that, some of the other investment which is proxy to inflation are like plantation company, steel, miner & also property companies. In booming economy enviroment, where inflation are high, the return form investing in the correct inflation-proxy is going to be very good.
There is no need for me to explain what is inflation and why inflation make people cry. Lets see why people laugh for it.
As inflation means everything increase in its price, investors who invest in those commodities that get price appreciation will also experience an inflated value of asset or networth. Investors who invest in oil & gas related companies or directly invest in oil & gas commodity will get handsome profit from the increase in crude oil price. However, high crude oil price cause fuel price have to be adjusted to the suitable & higher level which eventually transfer the burden to the consumer. Both the investors & non-investors are the consumer of petrol. But once the petrol/crude oil price increase in value, O&G investor gain handsome profit and the profit is well enough for them to pump years of expensive petrol compared to non-investors have to feel the pain of hi-fuel price.
Besides our everyday petrol, inflation make everything expensive, which ranged from construction steel to dairy product. Manufacturers smile for it as their product can be sold out at a higher price (provided that the cost of raw material do not increase faster than the products) For example, palm oil producers expecting handsome profit from the rising crude palm oil price and steel manufacturers happy with the higher steel price, while the company buying those products can easily pass the hi-priced to end-consumer, consumers, especially the non-investors will eventually be the victim.
Real estate is the same, development projects, increasing population & property demand or mere speculative trading activities make real estate price ever increasing. Who non-investors, owning a house become harder & harder. Low to medium-end people who are planning to buy a house will feel getting 1 is never been easy, cause as the income increase, their dream house price is also inflating. At another side, real estate investors become richer & richer, buying a property become easier & easier.
Thus, my advice is invest in financial asset or even tangible asset which will be benefited from the inflation. For example, buying O&G related company, the return will be good if the international crude oil price increase. You will feel that your networth is actually unaffected by the inflation, if not increase at a rate faster than the inflation rate. As mentioned in my KNM post, the return from investing in KNM is well enough for me to pump years of expensive fuel.
Besides that, some of the other investment which is proxy to inflation are like plantation company, steel, miner & also property companies. In booming economy enviroment, where inflation are high, the return form investing in the correct inflation-proxy is going to be very good.
Friday, July 10, 2009
Leverage your return by investing in warrant
Warrant may sounds familiar to retail investors, but not all of them understand how it work & even what is it.
Warrant is a right, which can be traded, of buying something at a predetermined price & has an maturation date.
Consider a case, Mr. A wanna buy a RM 500k house from Mr.B because he think the house worth more than that. But Mr.A has a cashflow problem, he can't get 500k. Then he ask Mr.B to issue a warrant stating that "The owner of this warrant has the right to buy the house at RM 500k anytime in the future but within 5 years." Which means the warrant will be expired after 2 years. And Mr.B sell this warrant to Mr.A with the price of RM50k. 50k for nothing tangible just a right. 4 years later, the house now worth RM 1 mil. Bringing the warrant, Mr. A meet Mr.B, Mr. A wanna use the right of the warrant. Mr. B has to do as stated in the warrant, which is selling the 1mil-house to Mr. B (the warrant holder) at the price of 500k. If Mr.A sell it out instantly, he gain 500K, minus the cost of the warrant, net profit is RM 450k. 50k turn out to be 450k, a not-bad 900% return. Change the point of view, how much the warrant worth if Mr.C wanna buy the warrant from Mr.A? The house worth 1mil, to buy the house need 500k, thus the warrant worth 500k. That amounts a 1,000% increase in value.
So how can we leverage our return through warrant? Let read another case.
Mr A & Mr B has 500k on hand. The same house and the same warrant like previous case exist here, and assume there are a lot of house to be sold. Mr A use the 500k to buy 1 unit of the house, he own the house instantly. Mr B buy 10 units of the warrant of the house and pay 500k just for the right and he own no house. 4 years later, 0.5M house become 1M house. Mr A sell it out & gain 0.5M or a 100% return. Each warrant of the house now worth 0.5M, Mr B sell all 10 warrants out and get back 5M or a 1,000% return.
So why not everyone trading only warrant instead of the real thing? What is the risk?
Considere this, 5 years later, the house price drop to 450k. (assume both of them haven't sold their houses/warrants) Mr A can decide wanna sold the house out or not with a loss of 50k or 10% decrease in value. But how much the warrant worth now? To convert the warrant to house need 500k. So who on earth wanna buy a 450k house by paying 500k instead of buying the house straightaway by 450k. That means the warrant now worth nothing, & will never worth anything cause it is going to expire one day later, even thought 1 week later, it's going to worth 1M again, the warrant will be just expired. In this case, Mr B loss everything or a 100% decrease in value.
How it work in share market?
It works the same way. Say YTL Power now is trading at around RM2.15 and the warrant is trading around RM 0.94. The warrant has a conversion price of RM 1.21 & will be expired in 2018. Mr A buy 1000 units of YTL Power (we call it the mothershare) & paid 2150. Using the same amount of money, Mr B buy 2287 units of warrant. 1 year later, YTL Power increase its value by 20% or trading at 2.58, at that time its warrant will worth 1.370 ( 2.58- 1.21 = 1.370). Mr A sell it and gain 430 or 20% while Mr B sell his warrant & gain 983 or a 46% return.
That's how warrant can leverage your return in investment, the same share or the same company you invest in but different instrument you invest through the return is different. Besides that, just remember leverage your return at the same time also leverage your risk.
I bought YTL Power warrant when it was trading at 0.64 & its mother share was trading at 1.85. The price of both now is 0.96 & 2.15( around that) now. My investment in YTL Power has give me an increase in value of a perfect 50% while the mothershare only increase 16% in value.
There are more i wanna share in warrant, which will be covered in my following posts.
"While most people say YTL Power is a very slow moving share and it's only for old man, i get a 50% return on investment from it in 3 months"
Warrant is a right, which can be traded, of buying something at a predetermined price & has an maturation date.
Consider a case, Mr. A wanna buy a RM 500k house from Mr.B because he think the house worth more than that. But Mr.A has a cashflow problem, he can't get 500k. Then he ask Mr.B to issue a warrant stating that "The owner of this warrant has the right to buy the house at RM 500k anytime in the future but within 5 years." Which means the warrant will be expired after 2 years. And Mr.B sell this warrant to Mr.A with the price of RM50k. 50k for nothing tangible just a right. 4 years later, the house now worth RM 1 mil. Bringing the warrant, Mr. A meet Mr.B, Mr. A wanna use the right of the warrant. Mr. B has to do as stated in the warrant, which is selling the 1mil-house to Mr. B (the warrant holder) at the price of 500k. If Mr.A sell it out instantly, he gain 500K, minus the cost of the warrant, net profit is RM 450k. 50k turn out to be 450k, a not-bad 900% return. Change the point of view, how much the warrant worth if Mr.C wanna buy the warrant from Mr.A? The house worth 1mil, to buy the house need 500k, thus the warrant worth 500k. That amounts a 1,000% increase in value.
So how can we leverage our return through warrant? Let read another case.
Mr A & Mr B has 500k on hand. The same house and the same warrant like previous case exist here, and assume there are a lot of house to be sold. Mr A use the 500k to buy 1 unit of the house, he own the house instantly. Mr B buy 10 units of the warrant of the house and pay 500k just for the right and he own no house. 4 years later, 0.5M house become 1M house. Mr A sell it out & gain 0.5M or a 100% return. Each warrant of the house now worth 0.5M, Mr B sell all 10 warrants out and get back 5M or a 1,000% return.
So why not everyone trading only warrant instead of the real thing? What is the risk?
Considere this, 5 years later, the house price drop to 450k. (assume both of them haven't sold their houses/warrants) Mr A can decide wanna sold the house out or not with a loss of 50k or 10% decrease in value. But how much the warrant worth now? To convert the warrant to house need 500k. So who on earth wanna buy a 450k house by paying 500k instead of buying the house straightaway by 450k. That means the warrant now worth nothing, & will never worth anything cause it is going to expire one day later, even thought 1 week later, it's going to worth 1M again, the warrant will be just expired. In this case, Mr B loss everything or a 100% decrease in value.
How it work in share market?
It works the same way. Say YTL Power now is trading at around RM2.15 and the warrant is trading around RM 0.94. The warrant has a conversion price of RM 1.21 & will be expired in 2018. Mr A buy 1000 units of YTL Power (we call it the mothershare) & paid 2150. Using the same amount of money, Mr B buy 2287 units of warrant. 1 year later, YTL Power increase its value by 20% or trading at 2.58, at that time its warrant will worth 1.370 ( 2.58- 1.21 = 1.370). Mr A sell it and gain 430 or 20% while Mr B sell his warrant & gain 983 or a 46% return.
That's how warrant can leverage your return in investment, the same share or the same company you invest in but different instrument you invest through the return is different. Besides that, just remember leverage your return at the same time also leverage your risk.
I bought YTL Power warrant when it was trading at 0.64 & its mother share was trading at 1.85. The price of both now is 0.96 & 2.15( around that) now. My investment in YTL Power has give me an increase in value of a perfect 50% while the mothershare only increase 16% in value.
There are more i wanna share in warrant, which will be covered in my following posts.
"While most people say YTL Power is a very slow moving share and it's only for old man, i get a 50% return on investment from it in 3 months"
Tuesday, July 7, 2009
The natural of Airline industry is always bumpy.
Somebody asked me AirAsia has been expanding very aggressive since its existing, so is it a good choice for investing? It is not that easy.
Undeniable, AirAsia is a legend in airline industry and people recognise AirAsia equal to low cost airline just as like Starbucks equal to coffee and Nike equal to shoe. Such a strong brand, that's the result of hard work by Tony Fernendes. Besides that, the management board is prominent in driving AirAsia to a continuously strong growth that make this once one-plane-but-lots-of-IOU(debt) airline company to today unstoppable airbus customer. However, just some point that investors have to take note before they get in any airline companies.
First unpredictable disaster make airline the first victim. H1N1, terrorist attack or event plane crash can shake the industry instantly without any prior notice. This kind of disaster can shake travellers' confidence in travelling that affecting sales of airline companies.
Fluctuation of oil price also fluctuate the income sheet of airline companies. Kerosene is the spirit of airline industry. That is a general knowledge to all, that is : plane need kerosene to fly, the margin of airlines' profit is highly depend on kerosene price just like food price affecting a restaureant's profit. Kerosene is priced around USD 20 more that the crude oil price, thus crude oil price is a proxy to kerosene price. Undeniable ( as i mentioned in previous post) the general crude oil price direction is upward ( as the general movement of CO supply is downward). Thus, airline companies' everyday work is to control the kerosene price they order. One of the normal pratice airlines are doint is to hedge the kerosene price, which means airlines fixed the price of kerosene they would like to buy at large amount for future utilization. As conclusion, airlines are always trying their best in controling the cost of operation, which is always increasing and determining how much of this cost is to be transferred to the clients. The case will be even more challenging for low cost airline, where the margin is natrutally low, rising of oil price cost will narrow their margin, which make the earning difficult to controlled well.
Forex risk is the next one. As airline is a international business where clients from all over the world accepting thir services by paying the price with their own currency. Thus, the income sheet of airlines is, again subjected to forex risk.
Financing problem make airlines at risk. Airline is a high capital business, where airlines always required tonnes of financing to keep their operation and also to expand their business like buying airplanes need a lot of capital. Any financing problem ( unable to receive financing) and changing interest rate push the beta of airlines higher. This is because increase of interest rate increase their cost of capital.
Economy downturn also make airlines business unpopular. Businessmen travelle less in bad economy condition as bussiness oppotunities are low.
Political factor is another thing investor has to put in to to-watch list. To successfully get approved of new route is not an easy job.
In conclusion, buy and hold is never the case for airline industry, investor has to aware of the factors they have to watch out. Any sudden change of condition on the factors i mentioned above can put airlines on a cautions list.
Anyway, if really i have to select an airline, i'd choose AirAsia, as their management are always prominent. They are brave, always be the first player rule out fuel charge & admin charge whenever they thing time allow. Economy downturn make low cost airline a first choice for distressed travellers. AirAsia's brand is so strong to make everyone can move.
Undeniable, AirAsia is a legend in airline industry and people recognise AirAsia equal to low cost airline just as like Starbucks equal to coffee and Nike equal to shoe. Such a strong brand, that's the result of hard work by Tony Fernendes. Besides that, the management board is prominent in driving AirAsia to a continuously strong growth that make this once one-plane-but-lots-of-IOU(debt) airline company to today unstoppable airbus customer. However, just some point that investors have to take note before they get in any airline companies.
First unpredictable disaster make airline the first victim. H1N1, terrorist attack or event plane crash can shake the industry instantly without any prior notice. This kind of disaster can shake travellers' confidence in travelling that affecting sales of airline companies.
Fluctuation of oil price also fluctuate the income sheet of airline companies. Kerosene is the spirit of airline industry. That is a general knowledge to all, that is : plane need kerosene to fly, the margin of airlines' profit is highly depend on kerosene price just like food price affecting a restaureant's profit. Kerosene is priced around USD 20 more that the crude oil price, thus crude oil price is a proxy to kerosene price. Undeniable ( as i mentioned in previous post) the general crude oil price direction is upward ( as the general movement of CO supply is downward). Thus, airline companies' everyday work is to control the kerosene price they order. One of the normal pratice airlines are doint is to hedge the kerosene price, which means airlines fixed the price of kerosene they would like to buy at large amount for future utilization. As conclusion, airlines are always trying their best in controling the cost of operation, which is always increasing and determining how much of this cost is to be transferred to the clients. The case will be even more challenging for low cost airline, where the margin is natrutally low, rising of oil price cost will narrow their margin, which make the earning difficult to controlled well.
Forex risk is the next one. As airline is a international business where clients from all over the world accepting thir services by paying the price with their own currency. Thus, the income sheet of airlines is, again subjected to forex risk.
Financing problem make airlines at risk. Airline is a high capital business, where airlines always required tonnes of financing to keep their operation and also to expand their business like buying airplanes need a lot of capital. Any financing problem ( unable to receive financing) and changing interest rate push the beta of airlines higher. This is because increase of interest rate increase their cost of capital.
Economy downturn also make airlines business unpopular. Businessmen travelle less in bad economy condition as bussiness oppotunities are low.
Political factor is another thing investor has to put in to to-watch list. To successfully get approved of new route is not an easy job.
In conclusion, buy and hold is never the case for airline industry, investor has to aware of the factors they have to watch out. Any sudden change of condition on the factors i mentioned above can put airlines on a cautions list.
Anyway, if really i have to select an airline, i'd choose AirAsia, as their management are always prominent. They are brave, always be the first player rule out fuel charge & admin charge whenever they thing time allow. Economy downturn make low cost airline a first choice for distressed travellers. AirAsia's brand is so strong to make everyone can move.
Wednesday, June 24, 2009
Don't try to predict share price movement
The share price of KNM can reach RM2.00, the bursa can go to RM15, the E&O will go up to RM1.50
OMG, stop letting me to hear that. I do EXPECT the KNM to reach RM2.00 in the very future, but just cant stand people foreseeing the share price like they are god. Warren Buffet said he don't know what is the share price of the companies he bought in next week, next month and next year, he is only able to know how much the companies worth. This is the street investor culture of saying how much the share price can go.
The target price is not the going-to-be price. It is, on another word, the fair VALUE.
A lot of street investor see the analysists' target price is the exact should-be price of a share. For example, RHB Research House (IB or RH or watever) valued KNM at 1.29 target price. After knowing that, a lot street investor will like to say : "RHB said KNM can go to 1.29" OMG, RHB RH only tell it is considered fair and make good sense to buy KNM at price below or at 1.29, but they never promise the KNM will reach 1.29.
Anyway, i never took analysists' target price seriously, i just refer it to support my view on a company. The target price is depend on market trend and sentiment, and is changing from time to time. You can see a target price of a share is going up with the rising of share price. Hahaha, its so funny. Say i tell you KNM today target price is 0.90 when it is 0.80, and tomorrow i call it buy at 1.00 when it is 0.90, then the day after tomorrow i reiterate buy at 1.20 when it is 1.10.
Investor should be able to know the business they are buying, they should learn how to value a company independently without fully depend on analysists' reports.
Remeber, no one in earth can know exactly how to share price move tomorrow, don't pretend you are god. You can only know how much a share worth for yourself.
OMG, stop letting me to hear that. I do EXPECT the KNM to reach RM2.00 in the very future, but just cant stand people foreseeing the share price like they are god. Warren Buffet said he don't know what is the share price of the companies he bought in next week, next month and next year, he is only able to know how much the companies worth. This is the street investor culture of saying how much the share price can go.
The target price is not the going-to-be price. It is, on another word, the fair VALUE.
A lot of street investor see the analysists' target price is the exact should-be price of a share. For example, RHB Research House (IB or RH or watever) valued KNM at 1.29 target price. After knowing that, a lot street investor will like to say : "RHB said KNM can go to 1.29" OMG, RHB RH only tell it is considered fair and make good sense to buy KNM at price below or at 1.29, but they never promise the KNM will reach 1.29.
Anyway, i never took analysists' target price seriously, i just refer it to support my view on a company. The target price is depend on market trend and sentiment, and is changing from time to time. You can see a target price of a share is going up with the rising of share price. Hahaha, its so funny. Say i tell you KNM today target price is 0.90 when it is 0.80, and tomorrow i call it buy at 1.00 when it is 0.90, then the day after tomorrow i reiterate buy at 1.20 when it is 1.10.
Investor should be able to know the business they are buying, they should learn how to value a company independently without fully depend on analysists' reports.
Remeber, no one in earth can know exactly how to share price move tomorrow, don't pretend you are god. You can only know how much a share worth for yourself.
How market trap work?
There are a lot of investment traps in the market. What is that? Is where rumors showing a company's share price is overly undervalued & performance is over weighted and follow by a sudden upsurge of share price which cause retail investors to rush in buying something valueless at high price. Buying this kind of share is a ticking boom awaiting to burst, an equilibrium game where there are winners & there are losers, the money flow from loser to winner and the winner is always the big guy.
How it work?
- at first the big guy(fund, hedge fun, large cap investors) searching companies background for undervalued companies
- those companies usually have the characteristic of healthy balance sheet, continuous earning record, good indicator of undervalued (low PE ratio, low Price-to-book value ratio) but low dividend yield, low growing prospect
-at the first place, they accumulate the share
-the encourage their friends working at stockbroking firm & publication company to let the public know the share is undervalued
-through various media, retail investors are exposed to the information of the company and accept that the company is good
-but at this time, no investors will move in due to low interest, low sentiment on the share price
- they will ask if the share is good, why the price is stagnant? if i invest now, i'll have to wait for a very long time
- the big guys place a sudden large amount of buying order to push the share price to surge for at least 30% at a rational pace
- retail investor's mind change, they are misguided to look the company as a fantastic company and keep getting in the share
- the big guys use various way to spread the rumors telling the public how much the share price will reach
- investor believe the share price is still way too cheap to get in as they believe the price will reach the price that the rumor tell, that is when the big guys exiting
- once big guys exited, no one are able to support the share price, the share price will eventually at free fall condition
That's it. So, be smart. Be an intelligent investor.
-
How it work?
- at first the big guy(fund, hedge fun, large cap investors) searching companies background for undervalued companies
- those companies usually have the characteristic of healthy balance sheet, continuous earning record, good indicator of undervalued (low PE ratio, low Price-to-book value ratio) but low dividend yield, low growing prospect
-at the first place, they accumulate the share
-the encourage their friends working at stockbroking firm & publication company to let the public know the share is undervalued
-through various media, retail investors are exposed to the information of the company and accept that the company is good
-but at this time, no investors will move in due to low interest, low sentiment on the share price
- they will ask if the share is good, why the price is stagnant? if i invest now, i'll have to wait for a very long time
- the big guys place a sudden large amount of buying order to push the share price to surge for at least 30% at a rational pace
- retail investor's mind change, they are misguided to look the company as a fantastic company and keep getting in the share
- the big guys use various way to spread the rumors telling the public how much the share price will reach
- investor believe the share price is still way too cheap to get in as they believe the price will reach the price that the rumor tell, that is when the big guys exiting
- once big guys exited, no one are able to support the share price, the share price will eventually at free fall condition
That's it. So, be smart. Be an intelligent investor.
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