Missing out and Guide to buying Illiquid stocks

I was back from my seven-day vacation last tuesday and just finished updating myself today on what had happened in that past seven days that I was out in the market. I will resume posting next week, monday. 🙂

For the mean time, enjoy reading Jae Jun’s posts in http://www.oldschoolvalue.com especially the links that I presented below.

I highly recommend that you follow his blog.

 

Missing Out

In investing, I suggest that you remain emotionless and Jae Jun say it best:

http://www.oldschoolvalue.com/blog/investing-perspective/making-money-market/

 

Buying Illiquid Stocks

Undervalued stocks that I am interested in are often illiquid (thinly traded/ few buyers and sellers) especially ROX but I just can’t ignore a stock trading at substantially below their book value (less than 50%) and trading at PE ratio of less than 10x.

Jae Jun presented a strategy on how to accumulate illiquid stocks:

http://www.oldschoolvalue.com/blog/investing-strategy/buying-illiquid-stocks/

 

 

 

Coursera, MVP’s message to Graduates, Stock Thoughts: APM, SGI

Coursera, MVP’s message to Graduates, Stock Thoughts: APM, SGI

Coursera

Last few months, I recommended a course in coursera: “A Beginners Guide to Irrational Behavior”

Believe me, it would not be a waste of time. It also includes how to manage your time well.

Promotional Video here:

http://vimeo.com/channels/guidetoirrationality

Sign-up here:

https://www.coursera.org/course/behavioralecon

 

MVP’s Message to Graduates

Worth the read:

http://www.interaksyon.com/article/57913/mvp-to-class-of-2013-kristel-reminds-that-education-is-a-right-and-blessing-use-it-for-our-people

 

APM

Profiling: Alcorn Gold Resources Corporation:

https://fundamentalenthusiast.wordpress.com/2013/03/26/profiling-alcorn-gold-resources-corporation/

 

SGI

Solid Group, Inc.:

https://fundamentalenthusiast.wordpress.com/2013/03/26/solid-group-inc-pse-sgi-2/

 

Investment Psychology: Arrogance

Read about Bill Ackman (must read):

http://www.vanityfair.com/online/daily/2013/02/bill-ackman-daniel-loeb-bike-ride

Question to ponder upon:

  1. Do the fund managers who traded against Ackman do it out of their distaste against him?
  2. Did the fund managers exploit Ackman’s psychological weakness?

Background of the case (you may not read the links):

Ackman claims that Herbalife is a pyramiding scheme and shorted the stock. He bets that the US government will declare Herbalife’s business illegal and deserves a stock price of $ 0.00.

More here: http://factsaboutherbalife.com/

A good blog detailing why Ackman’s thesis is wrong:

http://brontecapital.blogspot.com/2013/01/notes-on-visiting-herbalife-nutrition.html

He argues that Ackman missed the fact that Herbalife’s business model is a support group type. This support group is what makes Herbalife products worth buying.

 

Comments:

In my opinion, an investor where he finds him/herself in an investment where he/she is to prove the other side of the trade wrong (remember the story of Bob) is an investment worth walking away. An investor need not to swing the bat if he/she finds his rational mind clouded with emotions and personal biases.

No rush in investing. 🙂

Investment Psychology

Based on my experience (and readings on investors I admire), an investor requires the following:

  1. Sensible investment process that fits his/her personality (whether it is under fundamental or technical analysis).
  2. Portfolio allocation skill
  3. Investment Psychology awareness

Item number 3 is often neglected.

Benjamin Graham defines an intelligent investor as “patient, disciplined, and eager to learn.” An intelligent investor is a trait more that of the character rather than in terms of IQ.

We are lucky that we do not need to “fall” so hard to realize how important psychology is in investing. All we need is to learn from the psychological mistakes of other people.

Follow the story of Bob:

Bob’s fall:

http://blog.marketpsych.com/2012/10/resentment-investing-soros-emotional.html

Bob’s redemption:

http://blog.marketpsych.com/2012/11/hurricane-psychology-buying-pessimism.html

Comments:

In my opinion, playing any single player sport (in my case tennis) is the fastest way in improving psychological awareness since you will artificially subject yourself to the same psychological and emotional condition that is present in investing. Single player sports require you to be composed psychologically and handle your emotions well, especially if your intention is to win. Learning not to be distracted by the crowd, the noise, cheers, who were watching and what your opponents gestures are already psychologically and emotionally challenging.

I encourage those who want to harness their emotions and attain psychological composure to watch Roger Federer play. Roger Federer is called perfection in tennis for many reasons but for me it is because of how he maintains his psychological composure and handles his emotions during the game. Djokovic, the current number one, screams and smashes his racket every time he misses a crucial shot but that is very understandable because that is the norm. All top players do that. What is not normal is Federer’s.

Do you decide straight from the gut?, Nice Quote, Good Writer, Stock Thoughts: ZHI

Do you decide straight from the gut?

Try these tests:

  1. A bat and a ball together costs $ 1.10 in total. The bat costs a dollar more than the ball. How much does the ball costs?
  2. If it takes five minutes for five machines to make five widgets, how long would it take 100 machines to make 100 widgets?
  3. In a lake there is a patch of lily pads. Every day the patch doubles in size. If it takes 48 days for the patch to cover the entire lake, how long will it take to cover half of the lake?

 

Answer:

  1. $.10
  2. 100 minutes
  3. 24 days

Above are actually impulsive answers.

 

Real answers:

For question #1, you can use simple algebra to arrive at the answer of $0.05.

Let x= price of ball

(1+x)+x=$1.10

2x=$1.10 – $1

2x=$.10

x=$.05

 

For question #2, the output of a single machine is one widget for five minutes. So if there are 100 machines then it would take only 5 minutes to make 100 widgets.

For question #3, since the lily pads double in size everyday then a day before day 48, the pond was half covered. The answer is 47 days.

From: http://psych.fullerton.edu/MBIRNbAUM/PSYCH466/articles/Frederick_CRT_2005.pdf

Did you learn something that you can use in your stock investing? 🙂

 

Nice Quote

A creative man is motivated by the desire to achieve, not by the desire to beat others.”

By Ayn Rand

 

Good Writer

I like this blogger:

http://startwithyourpen.wordpress.com/

I found his works excellent. 🙂

Especially this:

http://startwithyourpen.wordpress.com/2013/01/04/free-fall/

 

ZHI

ZHI came ZHoomIng!

ZHI’s business plan to revitalize its business is its entry in the mining industry by entering into an operating agreement with Olympic International Sales Corporation which allows the ZHI to explore the latter’s mining claims in the province of Surigao del Sur.

As of September 30, 2012, ZHI has no MPSA.

No MPSA, not yet in commercial operations, net assets is worth P483k, no significant properties, but valued by the market at P1.5 billion.

What could be the reason that makes it worthy to be valued at P1.5 billion? Backdoor story perhaps?

http://www.pse.com.ph/resource/disclosures/2011/pdf/dc2011-5760_ZHI.pdf

 

As for me, I do not understand, I stay away.