China to raise benchmark rates

I'd say we are probably still some way off from euphoria. Currently, sentiment is good but not hyper-crazy yet. Valuations for most companies are fair, though there is still some under-valuation for small caps.

It's best for the careful, prudent investor to choose his investments carefully at this stage, all the while enphasizing margin of safety and capital preservation.

(01-11-2010, 10:33 PM)Musicwhiz Wrote: I'd say we are probably still some way off from euphoria. Currently, sentiment is good but not hyper-crazy yet. Valuations for most companies are fair, though there is still some under-valuation for small caps.

It's best for the careful, prudent investor to choose his investments carefully at this stage, all the while enphasizing margin of safety and capital preservation.

Agree with you MW.
Somehow I couldn't find any undervalued local counters that fit my criteria. Maybe I am too conservative in my approach but anyway, it's far better to be prudent.

An opinion to share with some of you, there could be some undervalued international counters. It's up to you all to sieve them out.

One of the thing that led me to anticipate the start of the euphoria is near is due to the SGX wish of acquiring Ozzie stock exchange.

If my memory doesn't fail me, the past M&A value for the year and half was substantially below USD5 billion for each individual deal except SGX's.

There are some deals above 5B but far and few as to a report I read. Most deals are much more simple and synergistic to the acquiring firm.

As long as we read increasing no. of M&A deals of larger value, perhaps we can also conclude the firms are willing to take on a higher risk appetite onwards.

BHP and Potash? Let's see how the outcome goes.

cheers.

Well Arthur, I think the M&A could be a sign of increased liquidity and improved prospects for companies. Furthermore, loans are very cheap now so some companies may be gearing up in order to acquire or merge, so we will probably see this trend continue for some time as long as interest rates remain depressed.

As for researching into international companies, no doubt I agree with you that there will be bargains out there. But sifting out these bargains is a tall order mainly because:-

1) As a retail investor, we have limited time and resources

2) We may not understand the PEST environment well enough for that particular foreign company

3) It may be difficult to apply Porter's 5-forces model to analyze corporate strategies.

4) Lack of sufficient information (e.g. annual reports) to make an informed assessment of prospects/plans and fundamentals.

(02-11-2010, 10:55 AM)Musicwhiz Wrote: Well Arthur, I think the M&A could be a sign of increased liquidity and improved prospects for companies. Furthermore, loans are very cheap now so some companies may be gearing up in order to acquire or merge, so we will probably see this trend continue for some time as long as interest rates remain depressed.

As for researching into international companies, no doubt I agree with you that there will be bargains out there. But sifting out these bargains is a tall order mainly because:-

1) As a retail investor, we have limited time and resources

2) We may not understand the PEST environment well enough for that particular foreign company

3) It may be difficult to apply Porter's 5-forces model to analyze corporate strategies.

4) Lack of sufficient information (e.g. annual reports) to make an informed assessment of prospects/plans and fundamentals.

For point (1), I would definitely agree as our resources and time are much more limited than professionals.
Thus, I set myself only to monitor the largest cap companies of MSCI 10 sectors.

The reason of doing so is pertaining to points (2), (3) & (4).
I fully understand where you are coming from for the PEST and Michael Porter's 5-forces model.

For a mega cap firm, the economies of scale is large and only large competitors are able to challenge them (most of time, but NOT all the time!)

Furthermore, the resources of finding their competitors, threat level, bargaining power of supplier, buyers, etc are much more easily available than the small caps firms.

That said, large cap firms normally give lesser returns than small caps (on the avg) but have a higher liquidity which if you found out some advantages, others will swamp in pretty quick.

Eg: YUM brand.
I was stalking this and accumulating slowly when the price was in the mid 30s. Never understood why would investors neglect such a counter then. The information for apply the models you mentioned were there all along.

Anyway, I have my own fair share of failures in some finanical counters as well. Proves that application of model is not all that counts. Ability to grasp individual firms' fundamentals differs from industries.
Some firms and industries are really easier to dissect than others.

Cheers



PS: If some of you guys are feeling strange why the market is so volatile these few weeks, its not only the Fed's impending annoucement that matters now. Technically, Dow is fluctuating at 11,200 point of the last high few months ago. These 2 reasons are supplying alot of volatility in the market right now.