Given NTA is around 95c per share, NAV around $1.30 per share, and gearing around the 35%, VPG seems to have little downside at these levels.
VPG closed up 8% today to 3.7c.
Thursday, February 19, 2009
Valad Property Group - Double Bottom as well?
Valad Property Group is one of the many oversold REITs in my book. Orbis has recently increased their stake. The VPG is showing a double bottom as well (following up from my PBG blog).
Given NTA is around 95c per share, NAV around $1.30 per share, and gearing around the 35%, VPG seems to have little downside at these levels.
Given NTA is around 95c per share, NAV around $1.30 per share, and gearing around the 35%, VPG seems to have little downside at these levels.
Pacific Brands Group (PBG) - Double Bottom
One to watch tomorrow is Pacific Brands. The chart is showing a double bottom. Look for a run higher from here.
Pacific Brands is oversold in my book. Trading at a PE of around 2-3 looks like a good punt at these levels. Pacific Brands is the company behind brand names like Bonds.
Wednesday, February 11, 2009
A-REITs
One of the hardest hit sectors on the Australian stock markets has been the Australian listed property trusts (A-REITs). The below graph shows exact how massacred this sector has been in the last 12 months.
Basically what the chart shows that if you invested $100 in stocks in the listed property sector back in the middle of 2001, not only would you have not made a single dollar in the last 8 years, but you would only have about $50 left.
Even worse is the 20 year chart. If you invested 20 years ago, you would be holding a loss today. The A-REIT sector has been absolutely slaughtered in the last 12 months.
There has almost been a perfect storm for this to happen. The reasons are as follows.
1. Forced selling by hedge funds.
Hedge funds have been forced to sell investments at any price as investors of the funds withdraw money from them at alarming rates. Many funds have closed or gone broke.
2. Traditional Retail investors with low appetite for risk.
The typical investor in A-REITs were retirees chasing dividends for retirement funds. As soon as the funds stopped the dividends, these investors run like mad. They are also the ones with the lowest appetite for risk, and the stock market at the moment is seen as way to risky.
3. Margin Calls.
As many A-REIT investors were leveraged, falls in many cases of 80% or more in share prices, has fueled further selling as margin loans have been called in.
4. Panic.
Even if a A-REIT investor does not fall into the above, many an investor will "cut their loses" after seeing there investment smashed. Also, after the share price has been hammered, investors start believing the "sky is falling". Why else did it lose 80-90% of its value unless something is wrong?
The A-REIT sector has the potential for amazing returns over the next 12-18 months for any money invested now. Whilst falling property prices will see Net tangible assets (NTA) values in these funds fall, many an A-REIT will need to see property prices fall 65% before there is no value left in them.
Basically what the chart shows that if you invested $100 in stocks in the listed property sector back in the middle of 2001, not only would you have not made a single dollar in the last 8 years, but you would only have about $50 left.
Even worse is the 20 year chart. If you invested 20 years ago, you would be holding a loss today. The A-REIT sector has been absolutely slaughtered in the last 12 months.
There has almost been a perfect storm for this to happen. The reasons are as follows.
1. Forced selling by hedge funds.
Hedge funds have been forced to sell investments at any price as investors of the funds withdraw money from them at alarming rates. Many funds have closed or gone broke.
2. Traditional Retail investors with low appetite for risk.
The typical investor in A-REITs were retirees chasing dividends for retirement funds. As soon as the funds stopped the dividends, these investors run like mad. They are also the ones with the lowest appetite for risk, and the stock market at the moment is seen as way to risky.
3. Margin Calls.
As many A-REIT investors were leveraged, falls in many cases of 80% or more in share prices, has fueled further selling as margin loans have been called in.
4. Panic.
Even if a A-REIT investor does not fall into the above, many an investor will "cut their loses" after seeing there investment smashed. Also, after the share price has been hammered, investors start believing the "sky is falling". Why else did it lose 80-90% of its value unless something is wrong?
The A-REIT sector has the potential for amazing returns over the next 12-18 months for any money invested now. Whilst falling property prices will see Net tangible assets (NTA) values in these funds fall, many an A-REIT will need to see property prices fall 65% before there is no value left in them.
Tuesday, February 10, 2009
Buying the daily oversold
One of the ways to make money as a trader is to buy companies that have been oversold on the day. Basically this means buying something on a heavy sell-off and selling later in the day when the share price has recovered.
A very good example of this was the trading in Lynas Corporation (LYC) yesterday. News came out of funding trouble on their rare earths project. The stock was heavily sold off on the announcement and dropped to 10.5c (from a previous close of of 26.5c). It quickly rallied back to 20c.
Buying around the low of 10.5c could have provided a profit of more than 90% in the space of an hour or so. There are not many ways of making such a huge profit in such a small amount of time.
Usually I recommend to sell on the same day as the buy (i.e. not hold overnight). LYC closed yesterday at 16c. It is currently trading at 15c.
A very good example of this was the trading in Lynas Corporation (LYC) yesterday. News came out of funding trouble on their rare earths project. The stock was heavily sold off on the announcement and dropped to 10.5c (from a previous close of of 26.5c). It quickly rallied back to 20c.
Buying around the low of 10.5c could have provided a profit of more than 90% in the space of an hour or so. There are not many ways of making such a huge profit in such a small amount of time.
Usually I recommend to sell on the same day as the buy (i.e. not hold overnight). LYC closed yesterday at 16c. It is currently trading at 15c.
Meo Australia (MEO) - Part 2
Meo Australia released their results this morning of the Zeus-1 drilling. The potential pay zone was 44m, but the results of the pay zone were less than encouraging with references made about wether there would be movable hydrocarbons.
This caused a panic and the stock was sold down to 12c. It has since recovered to 16c at the time of this post.
Buying at 12c on a daily oversold position could have lead to a very profitable day trade, just as Lynas' selloff yesterday provided when the stock fell to 10.5c and recovered to 20c only minutes later. This will lead me to my next post.
This caused a panic and the stock was sold down to 12c. It has since recovered to 16c at the time of this post.
Buying at 12c on a daily oversold position could have lead to a very profitable day trade, just as Lynas' selloff yesterday provided when the stock fell to 10.5c and recovered to 20c only minutes later. This will lead me to my next post.
Meo Australia (MEO)
Keep an eye on this one tomorrow (11/02/09). They are about to hit target depth of the Zeus-1 drill target (Large gas target). They closed at 22c today. If they hit gas, they could run close to 50c if the news is good.
Good news equals a large gas pay zone. Look for a gas column of 25m or more.
Good news equals a large gas pay zone. Look for a gas column of 25m or more.
Upside vs Downside
One my main metrics for buying any stock is the idea of upside vs downside. This basically means how much could I gain vs how much could I lose. On top of the "amounts" to be gained or lost is the likelihood of each happening.
To put this more into practice, here are two scenarios.
Scenario One
Stock price = 10c
Likely downside of 6c
Likely upside of 15c
Likelihood of upside of 50%
Scenario Two
Stock price = 10c Likely downside of 8c
Likely upside of 20c
Likelihood of upside of 40%
Both scenarios should provide value, but even though there is less chance scenario 2 will be to the upside, the rewards are greater, and the risks are smaller.Overall scenario 2 has the better risk vs reward profile.
Scenario 1 on average will return 10.5c for 10c invested. Scenario 2 however will return 12.8c on average. This can be easily seen if 10 trades of the same profile were completed.
In scenario 1, 5 trades would return 6c (30c total), and 5 trades would return (75c total). The 10 trades in total would return $1.05 (an average of 10.5c).
Scenario 2, 6 trades would return 8c (48c total) and 4 trades would return 20c (80c total). The 10 trades would return ($1.28).
Understanding upside vs downside is a key component to successful investing. Even though we had less wins in the above scenario 2, it was the much better strategy.
To put this more into practice, here are two scenarios.
Scenario One
Stock price = 10c
Likely downside of 6c
Likely upside of 15c
Likelihood of upside of 50%
Scenario Two
Stock price = 10c Likely downside of 8c
Likely upside of 20c
Likelihood of upside of 40%
Both scenarios should provide value, but even though there is less chance scenario 2 will be to the upside, the rewards are greater, and the risks are smaller.Overall scenario 2 has the better risk vs reward profile.
Scenario 1 on average will return 10.5c for 10c invested. Scenario 2 however will return 12.8c on average. This can be easily seen if 10 trades of the same profile were completed.
In scenario 1, 5 trades would return 6c (30c total), and 5 trades would return (75c total). The 10 trades in total would return $1.05 (an average of 10.5c).
Scenario 2, 6 trades would return 8c (48c total) and 4 trades would return 20c (80c total). The 10 trades would return ($1.28).
Understanding upside vs downside is a key component to successful investing. Even though we had less wins in the above scenario 2, it was the much better strategy.
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