Tuesday, October 04, 2011

Quick thoughts on strategy

Been super busy at work now, so this is just a quick post.

With the market going down, I think it's time to think of a general strategy to make the most out of it. Since I've already sold what I wanted to sell, there's nothing much more than I can do to raise cash to prepare for the ultimate bear scenario. I've limited cash as I've diverted most of it to renovation and stuff, so I'll just have to make do with what I have now.

The best thing to buy during a deep correction is not reits. No doubt that the price of reits will go down together with the general market, giving a very good and high yield. I think I've enough reits for the time being, so perhaps a smaller bite of selected reits at opportune time will be more than sufficient for generating some steady stream of income. Reits are good when the market is not moving - that is it's trending sideways. That'll be a time for it. The best thing should be the blue cheaps. Some of the major STI components will be sold heavily down and it will represent the best place to look for value. Combined with a small yield brought about by the low price, it'll be okay to hold it and waiting for the general market to recover. In fact, blue cheaps should be the first to recover rather than the mid-tier counters and reits.

As of specific counters to whack, I think it's still an early phase down. The charts will show the way. Patience is needed here.


Anonymous said...

I guess Keppel Corp and Sembcorp will be top of the list.

My guess is that Keppel will come to around 5.8 and Semb around 2.4.

STI overall will possibly bottom at being 1800 to 1900

Anonymous said...

Hi i'd like to ask if golden agri is a mid-tier stock?

la papillion said...

Hi anonymous 1,

I suppose if you want these two, then they will be on your list :) I don't guess what the tp will be...will have to rely on the charts to guide me :) Good luck!

Hi anonymous 2,

This is not a texbook answer, because really, it's very subjective. To me, no, it's a penny shares. Mid tier will be those in the dollar range. But I'm sure if you ask 10 person, you'll get 11 answers :)

Anonymous said...

How about buying some Inverse or Short ETFs? Get some profit while things go downhill.

In SGX, there is only one ETF for Shorting S&P500.
Need to go NYSE ARCA to get a whole list for shorting or ultra-shorting (x2) US, Europe, Emerging Markets etc.

Anonymous said...

Hi LP,
Keppel Corp and Semb Corp are cyclical blue chips. Is NOL consider the same or not as good?
Actually in a very severe bear market, throwing a dart at a cluster of blue cheaps will yield you something when the market
turns up again. Only thing, hopefully you are right in the choosing the kind of blue cheaps to include in the cluster.

No jokes. Who can guaranteed all blue cheaps will float when the tide comes in? One or even more than one may turn into blue black cheaps. So go for something "solid". Your judgment is as good as mine. No, yours maybe better. Any blue cheaps in mind?
Ha! Ha!

la papillion said...

Hi anonymous,

Don't think I want to have anything to do with that. There are better instruments to short than to go for such things. I would do shorting properly if I want to, not go for some instruments that does that shorting for me. Thanks for the suggestion though!

Hi temperament,

You're right - no blue chips are safe. I remembered chartered semi conductor and creative are once blue chips as well. All I'm saying is that during the downturn, it's better to get blue cheaps than reits, because blue cheaps will rebound faster than the rest (since STI consists of such blue chips, they would have to rebound since STI will have to rebound one day). Perhaps then, that will be the time to go for mid-tiers and other counters.

I'm just looking at it from the capital recovery point of view. Regarding which blue chip to buy, that entirely depends on your own FA and TA perspective. No comments on that :)

Martin said...

Hi, what about shorting the market? Originally I was so scared shorting the market (and I was claiming as well that I would never go short), but now I am not that scared and if I see the market heading down I sell it. I do the whole market and sometimes companies, but now I am making money on both sides of the market. And I no longer have issues with cash for investing although my account is relatively small. And I am happy with the way I trade now (even though I have some losses too).