First REIT: Buy Order Fulfilled @ $0.755

Yesterday, I spent the night analysing First REIT's graph chart to predict any possibility of its price maintaining at $0.755 when I hit the buy order the next day, which is today. Looking at both ADX and MACD indicators, I sense the possibility and went ahead with the buy order to acquire my first lot on First REIT. In fact, I bought this REIT at $0.755 not long ago but sold it after it quickly bounced back and locked in a small profit.

This morning the price unexpectedly went up to $0.76 despite increasingly downtrend strength and my buy order was put on hold. At that point of time, I could cancel the order and launch another one at a higher bid of $0.76 but knowing the erratic nature of a per-day trading pattern, I gathered my little patience and waited for the price to get weakened. My effort pays off eventually. The price indeed came down to $0.755 for a short while in late afternoon before returning back to $0.76 again. It was this short while that I acquired my first lot of First REIT.

So what's my next move? After series of stock market shocks since Aug, I have realised which REITs are more resistant to price fluctuations. My Starhill Global, being a retail REIT, fluctuated more than AIMSAMP (industrial) and First (healthcare) despite having a lower dividend yield. When the stock market improves and prices test resistance again, I will look forward to partially divest a few lots of Starhill Global and channel these returns to First. This is to reduce my portfolio's overall volatility and enhance overall dividend earnings.

Another good news is that AIMSAMP is currently undergoing a major unit consolidation which will seek to reduce volatility. In another word, the already-stable industrial REIT will become even more stable as a result.

Huge Market Selloff Again

After several weeks of price sideways, a huge wave of economic turbulence rocked the stock market yesterday and today. Yesterday was the worst punishment for cynical stocks, with my 2 REIT counters fell through their resistance prices.

AIMSAMP REIT, 26/9/11

Looking at the graph, this REIT seems to be relatively stable as price hovered around $0.205 and $0.20. Yesterday it fell down to $0.197, barely missing the $0.195 strong resistance and also the most ideal price to enjoy above-10% dividend yield. The last time it scrapped this price was in March, the month of the Japanese multi-disasters. With enough investable cash, I launched a small buy order at $0.195 but was not fulfilled due to large buy orders queuing up for the same price. Well, a lesson learnt today - if $0.195 seems pretty attractive for many investors, why not try $0.196? After all, $0.196 is still an ideal price. 

AIMSAMP REIT, 26/9/11 (including 2010)

I posted this graph, same as above but with much longer term that stretches all the way back to 2010. The rationale for this is to trace the next lower resistance line. $0.19 might seem to be the next best price but I personally prefer $0.185. This is because the $0.185 resistance price was tested twice in the graph before the next bullish uptrend. Still not get what I mean? Looking closer to the graph, you see that at both May 2010 and Jun 2011, this REIT tested the $0.185 after a downtrend and quickly reversed into an uptrend.

Using the ADX indicator, the DI+ has crossed below the DI- which suggests a bearish signal but the ADX line tells me that the bearish sentiments are relatively weak.

Starhill Global REIT, 27/9/11

This REIT took a greater hit than AIMSAMP, with price fell to as low as $0.575. I guess that is because of the riskier nature of retail real-estate as compared to industrial real-estate, thus explaining the higher volatility of Starhill Global. Let's take a look at the longer-term graph. 

Starhill Global REIT (included 2010)

The first thing that captures my attention is the ADX indicator, which suggests a downtrend with increasing strength. The ADX line has moved above the 20 value. If the price breaks through the $0.575 in coming days, there is a chance that it might reach the $0.55 resistance line. Notice that this resistance line was tested last year before price went for a huge uptrend. $0.535 and $0.51 are also possible regions for the price to descend. 

That's all for the painstaking efforts to analyse my counters.

No Plans To Enter The Stock Market

Once again, another bloodbath washed the stock market. My 2 counters are directly hit as expected. AIMSAMPI remains relatively stable while Starhill Global hits another new resistance of $0.59. I never expect this retail REIT stock to fall so much in a single-day trade, considering some positive news emerged from its plans to acquire more assets in downtown Singapore. But would I get into the market and buy the REIT stock at another new low? No.

As mentioned recently in one of my blog posts, "Next Move- Investable Cash", I am focusing my priority now on cash that will be used to invest on shares during major economic shocks. The latest bloodbath is not a major one since so many similar shocks have rattled the stock market recently. I am referring to the one similar to the 2008 economic recession where stocks above $1 now were traded as low as $0.10. Furthermore, I have abandoned the strategy to average down my dollar cost purchases. I don't have that sheer size of funds to carry out multiple purchases at each new low. Even when it reaches a strong resistance, I still need to employ technical analysis indicators and compare the trend to latest financial headlines to see if there are more rooms for further dips. The market is very volatile now and I am being extra vigilant to stay put on my plan for the time being.

With my investable cash increases over the next few months, I am looking to buy another counter, preferably First REIT, a defensive healthcare stock that adds a good dividend of 8%. Another healthcare stock, PLife REIT, is actually more defensive than First but looking at the updated 5.7% inflation rate, PLife's conservative dividend rate of 5% could not surpass it. Furthermore, it is very overvalued (NAV is only $1.39 but market price is $1.84). At such a volatile period, I am looking for dividend income instead of growth.

In the meantime, I will continue to read blog entries written by expert investors and study their ways of investment.

Next Move: Investable Cash

I don't regard any investment as risky unless an investor puts his money in a ponzi scheme, an unprofitable company, and his own ignorance. But not having a pool of investable cash is risky.

Since venturing into the stock market a year ago, I have been filling my trading account with investable cash that will be used to buy stocks. I never used up the cash pool as I was entirely new to the stock market investment. After accumulating some experience and spotting the potentials in REITs, I gobbled up shares of various REIT companies until the cash pool was almost dry.

Realised that the cash pool was almost dry, I pressed the 'stop' button and ceased all future stock purchases. Why? There are two reasons a pool of investable cash must not be dried up. First, investable cash will come into handy during emergency times. I am not saying the economic emergency but your own emergency. That is, should you encounter any emergency in yourself or your family, and require urgent money, you can withdraw investable cash immediately. Don't ever think about selling stocks to liquidate cash - it's either you wait for many days for the liquidated cash to return back, or you clock real losses if the market moves down. And second, investable cash will provide you the golden opportunity to take advantage of a massive market downturn. During the 2008 recession, those investors having a large sum of investable cash took advantage by gobbling shares of strong companies at a ultra-discounted price, allowing these nobodies to become today's millionaires in just 3 years.

As of now, my investable cash is slowly restoring back after adding in NS allowance and stock dividends. I am looking forward to sell and liquidate some of my holdings in AIMS and Starhill Global when they are ready to test the resistance lines in coming weeks, using the strategy of "buy at supports, sell at resistance". The liquidated shares will go to the investable cash.

The market is relatively unstable now and economic sentiments are weak. While I can't say for sure whether there could be a worldwide economy crash, I can sense the debt pressure is rapidly building up among developed but debt-flooded economies. Once the pressure has reached the boiling and could no longer be contained, banks around the world will collapse (the same way as 2008) and another global economic recession will happen. This time round, without China to save the day (the dragon itself is hibernating due to economic slowdown), things can get very nasty.

As said, I am preparing for the worst scenario and thus a large sum of investable cash must be present.

Hit-The-Supports vs Averaging Down

Hit-the-supports and averaging down are investment strategies employed by stock traders and stock investors to time their entries into the stock market. Hit-the-supports strategy involves buy orders at new lows and is a counterpart to another extreme side known as hit-the-resistance which involves buying the stock at new highs. It is a strategy to enter the depressed market at the best possible timing, which implies that the stock may have reached its bottom using various TA indicators to measure the price dive. The buy order interval is an one-time, sharp and straight purchase at that best possible price, unlike averaging down which involves multiple purchases at different prices. There are differences the two.

1. Level of Experience

Hit-the-supports strategy requires experience and skills needed by the investor. It is used by both very short-term traders and mid-to-long-term stock investors. This strategy requires the investor to have certain experience on technical analysis using graph charts and technical indicators to predict further possibilities for the price to dive. If various indicators tell the investor that there are little rooms for more price dives, it implies that the stock may have bottomed out and could be ready for a new bullish rally.

Averaging down is a layman strategy. It involves the investor making multiple purchases at different prices while the market is still depressing. There are downsides to it, however. This strategy is most likely suitable for rich investors who are too lazy to care about technical analysis but willing to fork out a lump sum to net up shares at different prices to lower down the average dollar cost. But for small investors like me, I would most likely run out of steam before the stock bottoms out. I have since ditched this strategy in favour for the hit-the-supports after accumulating certain experience on technical analysis.


2. Size of Funds

 

Using the above graph chart as a reference, in the period between the first and the third week of August, Starhill Global experienced a significant price dive from $0.66 to $0.585. Investor A employing the averaging down strategy would make multiple 1-lot purchases at, let say, $0.65, $0.60, $0.59, and $0.585, for 4 lots amounting to $2425, with an average dollar cost of $0.606 per share. Another investor, Investor B employing the hit-the-supports strategy would make a single 1-lot purchase at the support line of $0.585, amounting to only $585. Which one is better? If you have limited funds but experienced in technical analysis and knew where is the likely bottom support line of the stock, go for the hit-the-supports.

3. Rate of Rebounding

With reference to the above graph chart, Investor A has bought 4 lots of Starhill Global at different prices, with an average dollar cost of $0.606 per share. When the stock finally rebounded slightly at the end of August from $0.585 to $0.625, Investor A enjoys 1.9% capital gains. But for Investor B, with an avearage dollar cost of $0.585, enjoys 4% capital gains, which is a double of what Investor A enjoys.

Survived The Second Market Dive

We are several days into the second market dive (this time caused by worsening Euro debt crisis and US high unemployment) and the worst seems to be over. Once again, my REIT counters have resisted themselves well against the latest market dive, second in a row since August.

For example, AIMSAMP did not dive below the $0.2 and Starhill Global floated well above $0.6 in the starting week of this month. This performance shows that the second market dive is less of a destruction than the first one in August. Admittedly, my counters are still in the sea of reds, but this time paper losses are minimal. This is partly because of my averaging down strategy where I bought shares from time to time as prices dived in the first market crash. But I won't employ this strategy again as I realised that my funds are very much limited as a small novice investor. The next time when another major stock storm approaches the shores, I would employ the hit-the-supports strategy, which states that a stock investor would only buy new shares when the prices hit a support line and not when it is falling halfway down. As the saying goes, never catch a falling knife. Pick it up only when it has dropped onto the floor. Hit-the-supports strategy would definitely allow me to sleep well at night and let my counters spin back to green at a much faster rate than averaging down, at only a fraction of the funds needed. I will explain this in detail in my next blog post.

Some conservatives have commented that my highly-concentrated exposure to only two counters which are purely REITs (not blue-chipped ones like CapitaMall) is dangerous. I beg to differ. In the series of market dives since 2008 recession, both of my chosen stocks have displayed the resilience that is needed to sustain my claim that you can be highly-concentrated, almost dangerously, but very safe. Of course I don't recommend you to throw your eggs into one basket but how about two? I am doing that now and my wounds are only this minor. Had I diversify my stocks across many "safe bets", not only my dividends are much lower but in a market dive, even blue chips are not invincible. At least the fall in prices of my counters are partly compensated by their high dividends.

This is why I can sleep well at night without worrying so much about my investment. Just have a plan, a formula, a strategy, and a goal and you are on your way to success.

If You Want A Reliable Product, Buy Apple!

I have a 3rd-gen Ipod Touch. It is 1.5-year-old. I bought it during the first 4 months of my NS. Whenever I suffered grievances in the camp, this little gem will be there to heal my wounds with its wonderful features. However, due to the 'roughness' of NS, there were occasions where my little gem got itself hurt.

The first impact was a 1m drop from a locker. The LCD was flickering at first when turned on but later disappeared as months passed by. It also survived when I accidentally placed a fully-loaded fieldpack onto it. No crack, no deform, no scratch, and everything was well and running.

The second impact was a severe water damage during a heavy rainfall which soaked me and my entire bag with the device inside. The backlit was not working, the touchscreen became insensitive and there was no sound. After a search on the net, I was advised to dry the device as there are pockets of water still left in it. I left the little gem in a dry cabinet and turned the settings to "zero humidity" a.k.a. full dryness. After 3 days, the backlit came back to life but the touchscreen was somehow not responsive to my fingers. After a week, it too came back to life and the whole device was running again. It survived the first water damage.

The third impact was also a water damage. The cap of my BMT-era bottle came loose and a small amount of water leaked and flooded a compartment of my bag which contained my little gem. The backlit was knocked off for several days and slowly it came back to life again. I was utterly impressed by Apple's durability in its manufacturing of Ipods.

Seriously speaking, I haven't seen anything that can survive multiple impacts without permanently knocking it out of action. Apple products have certainly lived up to its reputation which explains its massive popularity nowadays. No wonder Apple's shares is standing at a whopping US$374.05 as of today.

If nothing goes wrong with Apple's QC and reliability following Steve Jobs' resignation, my next choice is an Apple. I am looking forward to purchase the highly-anticipated Iphone 5 after ORD and a Macbook for my university education.

Investor vs Entrepreneur: Both Are The Same, Actually

This comparison between a stock market investment and a down-to-earth business came to my mind long ago but never had the interest to write a blog entry. Today, as I read more books on investment and business, I find similar traits that exist between the two.

Going into the technical details, both are largely similar, and even related to each other:


Raising Capital

You need a certain amount of capital to start both investment and business, depending on the current market price for the stock and the current market value for the business. Investors and entrepreneurs are raising capital to start their dreams, either by working as an employee, pairing up with partners, or borrowing funds from financial institutions. A entrepreneur can raise capital through investment in the stock market, while an investor can also do that through earnings proceeded from his business.

Knowledge and Experience

Both investment and business require vast knowledge and practical experience in order to do well. An investor and an entrepreneurs spend many hours on research before and during their course of investment/business, by reading books, acquiring techniques from experts, sharing of knowledge through partnership, attending seminars, and most importantly learning from mistakes.

Objective

Both worlds seek to earn money, what else can there be? But unlike an investment, a business doubles up as a platform to satisfy societal needs. For example, a car business aims to satisfy the needs of affluent people with transport convenience and social status.

Counter vs Outlet

Any investment or business requires a platform to grow. In an investment, a platform is known as a counter. An investor buys a stock and it automatically becomes a counter. Likewise, a entrepreneur starts his business in an outlet, can be in the form of retail store, a showroom, an office, or street venture depending on the nature of his business. But unlike a counter, an outlet needs physical maintenance and staffs to run the show, which translate into a higher price than the investment which is nothing more than a digital figure presented on the computer screen.

Communication

A private investor who operates on an one-man show does not need to have a set of good communication skills, especially in this Information Age where internet has allowed private investors to skip communicating with their stock brokers and financial managers. Private investors are no longer depending on these 'middlemen' to carry out basic routines such as buy/sell orders. On the other hand, public investors who are working for investment institutions such as DBS Vickers Securities, as stock traders or stock analysts need to communicate well with their clients. Unlike a private investor, a successful entrepreneur is a powerful communicator. Good communication will produce good businessmen. All businesses are public. Entrepreneurs need to communicate effectively with their buyers in order to sell their products.

Human Resources

If there is any major difference between the two, I would say it will be the human resources. A business requires a CEO, various managers, executives and junior workers (unless it's a sole-proprietorship which doesn't sound like a business to me due to its one-man show structure). Investors do not need that kind of hassle structure. They are everything themselves. They research on new stock products, manage their own investment accounts, analyse the stocks via fundamental analysis and technical analysis, buy and sell stock products themselves, etc. Investors are like sole-proprietorships but require no registration, no communication, no physical outlet, and lower capital.

***

End of the day, I would say that both are the same, actually. An investor is a businessmen and a businessmen is an investor. Sounds complicated? A businessmen invests his time and money on a business while an investor too, invests on stocks that are part of the business. For example, I own part of AIMSAMP and Starhill Global through shareholdings. There are disparities between the two but ultimately, on a personal agenda, is to earn money, and on a macro agenda, is to start a business or investment and work towards one's goals.

Well, no doubt some people will not label an investor as an entrepreneur. But having carried the same set of elements and skills as an entrepreneur, there is this term known as "entrepreneurial investor". That is, to invest on the stock market from the perspectives from an entrepreneur. So, when people ask me whether do I own a business, I would reply with a yes. I own businesses via shares and there are already the company's management and board of directors to perform all the daily operations for me. If the company no longer meets my expectations, I will sell away this counter (like closing down a non-profitable outlet), identify another good company and invest in it when the correct timing permits.