the masses are still drinking coffee

The masses are nervous now, and that means the markets will continue to trend higher.  When the masses join the bullish club and turn euphoric, then it will be time to bail out.  For now, it’s not time to sell and the fact that more Americans enjoy a cup of Java indicates clearly that the market is not ready to crash.  - Sol Palha


OVERWEIGHT on Properties, Plantation and Power in 2016, selective exposure into the Oil and Gas and Banking
higher levels of exposure into the smaller- and medium-cap space for outperformance, though also maintaining a trading stance on the larger-caps to benefit from its liquidity and the market volatility
Our top picks for 2016 in the large-cap space are CIMB Group and Genting Plantations. For the smaller-caps, we like SKP Resources, TSH Resources, Ta Ann Holdings, Cypark Resources, Prestariang, TDM and Uzma.
 - PublicInvest Research


We prefer earnings visibility and ringgit depreciation beneficiaries. Banks offer earnings visibility at cheap valuations, while healthcare stock and other exporters benefit from ringgit depreciation.
We recommend neutral positioning in chemicals, consumer discretionary and utilities sectors while being underweight on energy, staples, industrials and telcos
Nomura's top five favoured stocks for Malaysia were Malayan Banking Bhd for the financial sector, IJM Corporation Bhd for the industrials sector, Karex Bhd for the staples sector, Genting Malaysia Bhd for the discretionary sector and Tenaga Nasional Bhd for the utilities sector.
- theedgemarkets.com  

A canary died

- in 2008 fund closures became one of the canaries in the coal mine. 
- Last week, Third Avenue Management shut down its $788m ‘Focused Credit Fund’ – a fund investing in corporate bonds. 

- the oil price is now capped for the foreseeable future ...until we see some proper carnage in the corporate sector (we’re on the way there, the amount of distressed debt in oil and gas is picking up fast), we won’t see things bottom out

(Money Morning)

normalized earnings

For cyclical firms, the easiest solution to the problem of volatile earnings over time and negative earnings in the base period is to normalize earnings. When normalizing earnings for a firm with negative earnings, we are simply trying to answer the question: What would this firm earn in a normal year? Implicit in this statement is the assumption that the current year is not a normal year and that earnings will recover quickly to normal levels. This approach, therefore, is most appropriate for cyclical firms in mature businesses. - Prof Aswath Damodaran

How this can be done (by Jae Jun)

ROE method:

1. Get the past 3 years and TTM ROE ratio
2. Take the average
3. Multiple the average ROE to the latest shareholder’s equity figure from the balance sheet to get the normalized net income
4. Divide by shares outstanding to get normalized earnings

Profit margin method:

1. Get the last three year net margin and TTM
2. Take the average
3. Mutiply the average net margin to the TTM revenue to get normalized net income
4. Divide by shares outstanding to get normalized earnings

Investing in the apocalypse

Investing in the apocalypse

book by: James Altucher, Douglas Sease

3 principles of apocalypse investing -

• Fade the fear - buy the fallen index when others are selling in panic; works for stocks too, but when drop by more than 10%
• back door investing- buy large cap strong companies involved in solving the problem, best when crisis will end quickly
• front door investing -buy speculative companies specifically involved in solving the problem, suitable for long-term, slowly developing crisis

E.g. pandemic
fade the fear - buy the falling markets
back-door - companies with involvement in vaccines e.g. GSK, PFE
front-door - companies focusing on specific vaccines e.g. BCRX

management

Vishal Khandelwal :

• A management that has a history of borrowing money to grow its business will keep borrowing. A CEO who is a serial acquirer will keep acquiring companies left, right, and centre. Someone who has a history of going overboard with future plans will continue to go overboard with future plans.
• until you as an investor get demonstrated proof of the management’s change in behaviour (from bad to good) – not just language but a real change – just smile and nod and not believe a word they say.
• You must assess or talk to a company’s management to understand its past behaviour – capital allocation record, business ethics, and shareholder friendliness…and to assess whether they are the right people to guide the business in the future.