It's an inspiring book, "Anyway - The paradoxical Commandments" by Kent M. Keith. This book is about finding meaning not in other people's applause, but finding it in the very act of doing things that you think is right. Here's the 10 paradoxical commandments:

1. People are illogical, unreasonable, and self-centered. Love them anyway.

2. If you do good, people will accuse you of selfish ulterior motives. Do good anyway.

3. If you are successful, you will win false friends and true enemies. Succeed anyway.

4. The good you do today will be forgotten tomorrow. Do good anyway.

5. Honesty and frankness make you vulnerable. Be honest and frank anyway.

6. The biggest men and women with the biggest ideas can be shot down by the smallest men and women with the smallest minds. Think big anyway.

7. People favor underdogs but follow only top dogs. Fight for a few underdogs anyway.

8. What you spend years building may be destroyed overnight. Build anyway.

9. People really need help but may attack you if you do help them. Help people anyway.

10. Give the world the best you have and you'll get kicked in the teeth. Give the world the best you have anyway.

Today I trimmed off CSC from my portfolio, cutting out all my stake in it. It was a love-hate relationship.

I bought it entirely on technicals, held it with speculative hope, thought I'm holding it for investment but sold it on a rational and businesslike manner. I believe CSC will have a splendid FY08, but I couldn't care less anymore. This is simply a business that holds no place in my revamped portfolio.



I went in 5 lots at 0.305 on 16th April, 2007. Went in another 20 lots at 0.385 on 22nd May, 2007 after csc announced that it won a contract worth 200 million (something like that, can't remember the exact details). I made 2 mistakes:

1. Bad entry point on 16th April. I don't know what I'm thinking about.

2. Even worser entry on 22nd May. I bought on news that they won a contract, whereas I should have sold. This gap up is soon covered and the stock price went up after that. But by buying 20 lots at a high of 0.385, I basically sealed my returns for csc, no matter how great it looks. This lesson is already well learnt by me. It's my first exposure to being a contrarian instead of following the herd instinct.

At a price of 0.305, I bought it at a PE of 35 times (FY07 earnings). At a price of 0.385, I bought it as a price of 44 times. Considering the low margins (though it's better than most construction firms, I must admit), erratic earnings subjected to economic cycles and low ROE, is it a good buy? Furthermore, at a PE of 35 times, do I really expect the earnings of CSC to grow at 35% or 44% pa?

Subsequent mistakes come from not knowing when to sell off a cyclical stock. At the peak of the bull run, csc was trading at 0.495, PE of 57 times. I didn't sell it. My rationale then was that since the price kept creeping up, it will continue to creep up too. Even when the price first broke past ema20d, then ema50d, then ema100d I was still holding it. I thought it is just a correction and things will improve.

So what's my total losses?

Total capital input: $9,282.92
Total losses without dividends: $2,290.02
Total losses including dividends: $2,232.21

% losses inclusive of dividends : 24.0%

Below is the chart for HSBC. I looked at the chart after I updated a newer version of chartnexus today. Now they even include HK stocks :) Amazing..and it's free too :) To all the guys/gals at chartnexus, thks for all the great work!


As mentioned in previous charting of hsbc, there is a rising wedge. But as I looked at it today, I realised that it didn't really breakdown as the pattern indicated. Instead, the price seems supported by ema20d and is also resisted at around 137.

Break below 137, I think we can expect more downside, at least for the shorter term. Break above 137, esp with high volume, we can see a uptrend.

Today I killed another 5 more mosquitoes. I affectionately call them mozzies. I still keep a running tab of how many I manage to kill, just for the record. You can check it out here.

I must confess that I take no pleasure in killing these irritating insects. If it wasn't for the fact that they can create life threatening diseases to humans living around my area, I wouldn't be bothered. Ants and spider live a happy existence in my home.

Having killed so many mozzies, I think I can write a little more about how to go about detecting them and subsequently killing them.

Detection:

I follow the my own set of rules for detecting the presence of mozzies:

1. A buzzing sound is heard

2. I've been attacked by mozzies and there is a mark - those typical swelling followed by an insatiable itch on the affected area - to show it

3. Detection by sight

No 1 and no 3 have to occur together before I will go into 'hunting' mode. If no. 2 occurred, 'hunting' mode is justified without the occurrence of no. 1 or no. 3 or both.

Once hunting mode is on, a can of insecticide will be in my hands. I do not practice random spraying of insecticides all over in the hope of hitting one by luck. I will wait for the mozzies to rest on a surface before spraying. Usually they will fly over a few minutes before resting on a vertical or inclined surface. I've no idea why horiontal surfaces are not conducive for mozzies. Either that, or I'll be the human bait and I'll stand motionless for a few minutes to bait the mozzies to attack me. Once they settle on my skin for about 5 seconds, I'll spray.

The time interval of 5 seconds is to get the mozzies into feeding mode first so that my hit rate is higher. Key areas to focus on is the feet area or the head area, which are places that mozzies like to feed on.

Once sprayed, the procedure is repeated until:

1. The mozzies body is found and accounted for (killed and accounted for)

2. There is no activities for a prolonged period (missing in action)

Once 1 or 2 occurred, hunting mode is deactivated. Normal activities resumes :)

Here's a checklist from Peter Lynch's book, One up on wall street:

Stocks in general:

1. P/e ratio – is it low or high for this particular company and for similar companies in the same industry
2. The percentage of institutional ownership
3. Whether insiders are buying and whether the company itself is buying back its own shares. Both are positive signs
4. The record of earnings growth to date and whether the earnings are sporadic or consistent (the only category where earnings may not be important are asset plays)
5. Whether the company has a strong balance sheet or a weak one (debt-to-equity ratio) and how it’s rated for financial strength)
6. The cash position. With $16 in net cash, I know Ford is unlikely to drop below $16 per share – floor of the stock

Stalwarts

1. These are big companies that aren’t likely to go out of business. They key issue is price, and the p/e ratio will tell you whether you are paying too much
2. Check for possible diworseifications that may reduce earnings in future
3. Check the company’s long term growth rate, and whether it has kept up the same momentum in recent years
4. If planning to hold the stock forever, check to see h
5. How the company fares during previous recessions and market drops

Slow growers

1. Since you buy these for the dividends, check to see if the dividends have always been paid, and whether they are routinely paid
2. When possible, find out the percentage of the earnings being paid out as dividends. If it’s a low %, then the company has a cushion during hard times. If it’s higher %, then it’s riskier than the company can continue paying the dividends.

Cyclicals

1. Keep a close watch on inventories, and the supply-demand relationship. Watch for new entrants into the market, which is usually a dangerous development
2. Anticipate a shrinking P/E multiple over time as business recovers and investors look ahead to the end of the cycle, when peak earnings are achieved
3. If you know your cyclicals, you have an advantage in figuring out the cycles. The worse the slump in the cycle, the better the recovery will be. Vice versa.

Fast growers

1. Investigate whether the product that’s supposed to enrich the company is a major part of the company’s business
2. What the growth rates in earnings has been in recent years. Favourites ones are in the 20 to 25% range. Wary of companies growing faster than 25%. Those 50% usually are found in hot industries, a nono
3. That the company has duplicated its successes in more than one city or town, to prove that the expansion will work.
4. That the company still has room to grow.
5. Is the stock selling at P/E ratio at or near the growth rate? In fair valuation, the P/E should be the same as the earnings growth rate.
6. Whether the expansion is speeding up or slowing down. For companies selling products which customers buy only once, a slowdown can be devastating. Not so much for companies selling product which customers have to keep buying
7. That few institutions own the stock and only a handful of analysis ever heard of it. With fast growers on the rise this is a big plus.

Turnabouts

1. Most important, can the company survive a raid by its creditors? How much cash does the company have? How much debt? What is the debt structure? And how long can it operate in the red while working out its problems without going bankrupt? If the company have to issue shares to turnabout, the company may turnabout, but the stock might not
2. If it’s bankrupt already, then what’s left for shareholders?
3. How is the company going to turn around? Has it rid itself of unprofitable divisions?
4. Is the business coming back?
5. Are costs being cut? If so, what will the effect be?

Asset plays

1. what’s the value of the assets? Are there hidden assets?
2. How much debt is there to detract from these assets? Creditors will get the share first
3. Is the company taking on new debt, making the assets less valuable?
4. Is there a raider in the wings to help shareholders reap the benefits of the assets?

When to sell?

Slow growers

1. Company lost market share for 2 consecutive years and is hiring another advertising agency
2. No new products are being developed, spending on research and development is curtailed. Appears to be resting on its laurels
3. Two recent acquisitions of unrelated business look like diworseifications and the company announces it is looking for further acquisitions “at the leading edge of technology”
4. The company has paid so much for its acquisitions that the balance sheet deteriorated from no debt and millions in cash to no cash and millions in debt. No surplus funds to buy back shares
5. Even at lower price, the dividend yield is not high enough to attract buyers

Stalwart

1. New products introduced in the last 2 years have mixed results, others still in testing stage and are a year away from marketplace
2. The stock has a p/e ratio of 15, while similar quality companies in the industry have p/e ratio of 11-12
3. No officers or directors have bought shares in last year
4. A major division that contributes 25% earnings is vulnerable to an economic slump that’s taking place
5. The company’s growth rate has slowed down, though maintaining profits by cutting costs, future cost cutting opportunities are limited

Cyclicals

1. Sell towards end of cycle. Look for inventories building up/falling commodity prices/new competition.
2. demand for product is slowing down
3. Compnay doubled its capital spending budget to build a fancy new plant, as opposed to modernizing the old plants at low cost
4. Company tried to cut cost but can’t compete with foreign producers

Fast growers

1. Watch out for the end of second growth phase of company
2. When a lot of analyst are looking into it, giving highest recommendations, 60% held by institutions and coming out in magazines
3. P/E gets bigger and reaches illogical levels. When p/e reaches 50, can the company still grow at 50% earnings?
4. Same store sales are down 3% in the last quarter
5. new store results are disappointing
6. Top executives join rival firm
7. Company returned from a show for intuitional investors
8. Stock is selling at p/e of 30, while most optimistic projections of earnings growth are 15-20% for next 2 years

Turnabouts

1. Sell when it’s turned around
2. Debt, which has declined for 5 straight quarters, just rose by 25 million in latest quarterly results
3. Inventories are rising at twice the rate of sales growth
4. P/e is inflated relative to earnings prospects
5. Company’s strongest division sells 50% of output to one leading customers, and that customer is suffering from slowdown in own sales

Asset plays

1. Wait for raider to come
2. Although the shares sell at a discount to real market value, management announced it will issue 10% more shares to help finance a diversification program division expected to be sold for $20 million only brings $12 million in actual sale
3. Institutional ownership risen from 25% to 60%.

Was alerted to China hongxing when I saw a thread in cna forum regarding its excellent results. I did browse through its quarterly results and found it pretty impressive, hence my initiation report on China hongxing.

What impressed me most is the high net margins generated from china hongxing business. They specialised solely on selling sports shoes, apparel and distribution business. The gross margins hovers around 30-40%, which is what I'll expect. But the net margins is around 15-20% for sports shoes. I would have expected a net margins of around 10%, having browsed through a couple of sports shoes company listed here and in HK.

I had such a hard time finding their number of shares because of a few issues:

1. They have convertible shares offering, which makes the number of shares outstanding very messy as they convert at different times

2. They split their shares 5 to 1 (every 1 ordinary shares is split into 5) to increase the liquidity, creating more confusion for me.

This is my compiled data. Note that the EPS is based on basic, non-diluted. The diluted one is too messy for me to keep track. All entries are in RMB ('ooo).


As I mentioned, the net margins is considered high for their business. I read that their sports shoe brand Erke is one of the top sports brand in PRC, so perhaps that accounts for their higher margins. Low debts and having a pretty strong balance sheet, at first glance. The founders own a huge percentage of the shareholdings too.

A few things I don't like about Hongxing:

1. I don't like it when companies split up their shares for more liquidity. Same pie but cut into more pieces only. The management mentioned splitting up the shares for more liquidity. Seems like the management is overly concerned about share price, though this could be a one-off incident and my judgment could be too harsh.

2. ROE is high but not consistent. I have no idea where the next ball park figures for ROE is next year and it keeps me from having a good valuation of Hongxing into the future. But from their latest quarterly results, ROE is around 12% annualised. Earnings are too erratic too.

3. They are listed only in 2005, so the history is a bit too short.

As such, no more investigation into this until perhaps after they stabilized their ROE and earnings per share. I wonder how they will fare once the Beijing Olympics fever fade away. They are trading at around 20x FY07 earnings at a current price of 0.675. Perhaps when the price reaches 0.40 again (around 10x FY07 earnings) then it'll be more realistic.

TA looks poised for another cycle of upsurge though.

I just finished reading the Warren Buffett Way by Robert G. Hagstrom. Not particularly a good read for me, so I'll rather not review it. Sometimes I do wonder if the sequence of the readings will affect the satisfaction of reading a book. I think so, to a huge extent. When I didn't know better, I suppose I'll have thought that the Warren Buffett way will be a good reading. But for me now, it seems a little diluted and leaves me craving for more.

In addition to that book, I also borrowed another tome by Ken Fisher, son of Phil Fisher. The book is titled "100 Minds that made the market". I mean it when I said that it's a tome. Specifically, it's a 390 over pages thick tome about 100 individuals who made contributions (either good or bad) to the investment sphere that we know today.



The reason why I borrowed it is because (in order of importance)

1. It's a brand new book - I'm such a sucker for new books because I loved the smell of it. Nothing excites me more than reading a brand new book for the first time :)

2. I love reading the past. There are 100 individuals listing in the book, detailing in 2-3 pages their autobiography and their impact. I think I'll be wonderful to trace the history of all these people.

However, given my time constraints, I'm afraid I'll have to forego reading that book. It's unfortunate but necessary. I still have a list of readings that are more urgent than the history. These are:

1. The Intelligent Investor - I've not finished reading it despite having it for some time. It wasn't a good read for me the last time I tried reading, since I'm more inclined towards trading. Hopefully my dozens of investment related books will prep me for this blockbuster of a book. Problem about this book is that it's too heavy to carry it around everywhere I go, which makes it hard for me to pursue reading. I read during nonsense waiting time like in the trains.

2. Security analysis - Same as above.

3. Berkshire's annual report - this is the worst of it. I HATE reading from the internet and that is my main inhibition. I'll see if there are print versions of it in the library...that will really really make it more conducive for me.

I'm excited yet fearful of what my holdings will be like in the future. To quote biblical text, let me work out my own salvation with fear and trembling.

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Chairman for bullythebear is going to write a half year report statement coming end of may. Watch out for it!

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I still can't stop browsing the 100 minds that made the market. As Ken Fisher said, he wrote the book for fun, which I think it's true. I read about a few luminaries of the investment sphere, Rothschild, Morgan, John Law, Benjamin Graham, Rowe Price, Charles Ponzi, William Hamilton, John Maynard Keynes, Jesse L. Livermore and Hetty Green. Hetty green is by far the most interesting of them all, also known as the "Witch of Wall street". Perhaps one day I'll just blog about her :)

Seems like it's one disaster after another. Myanmar had barely finished with its cyclone and China is struck with a 7.8 magnitude earthquake.

A couple of china companies listed here came forth to offer help and aid to survivors - something which I found touching. There's a lot of announcements today regarding whether any of them got hit by earthquakes.

1. China Sports - not affected. Only 4% of assets are held around the region but no points of sale in affected region.

2. Synear - production plant is in Chengdu. Plant did not suffer material damage, neither are the staff hurt, but for safety precaution, plant is shut down on 13th May. Unable to touch base with about 8 distributors in the worst-hit areas. Synear will contribute 1 million RMB to Red cross for victims.

3. Hi-P - has a small operation near Chengdu. Has to be shut down due to no power supply until power supply resume. Expected to be minimum impact.

4. CentraLand - had two current development projects located in Zhengzhou, Henan province, located 1050 km from epicentre. Group's operation not affected.

5. China xlx - Plants is located at Henan, 1000 km from Sichuan. Expected to have no impact on operations.

6. Ferrochina - not affected.

7. Sino-env - not affected. Sends condolences to victims and is currently looking for ways to aid survivors of the disaster.

Seems like most are not affected. Synear is the most affected of them it seems. Money isn't everything, you only have 1 small fragile life.