Dr Tee (Ein55)

Warren Buffett Investment Styles Evolution

Posted on March 7, 2020 Written by Dr Tee (Ein55)

Warren Buffett has gradually adjusted his investment styles over the past few decades. In the early years, he applied more on value investing to buy stocks at discount. Then he gathered more stocks with steady business but slower growth (eg. Wal-mart, Coca-Cola, etc).

However, Berkshire is a listed investment company, Warren Buffett has to “evolve” to increase the growth rate of investment. Therefore, it is not a surprise when we see Warren Buffett started to invest in technology company (eg. IBM and Apple) for higher potential return. Despite he is not a technology person (he usually said don’t invest in something you don’t know), he could still make a decision through the financial reports of there technology companies.

Similarly, Warren Buffett has significant investment in airlines stocks as the cyclic stocks could give higher capital gains through longer term cyclic trading or mid-term investing for a few years. Warren Buffett enjoyed tremendous gain in the past in “trading” PetroChina, Buy Low Sell High in 4 years.

So, just be yourself, no need to copy other people’s best method, eg Warren Buffett styles. Before any investment, reviewing own past history of investment performance (reasons for successes or failures), leveraging on other people’s proven strategies, integrate and reshape into own unique stock investment and trading strategies, John or Mary’s Styles.

The only thing not changed is change itself. It is fine for retail investors and traders to adjust own styles over the years when one has identify the “sweet spot” which one is comfortable, eg. “buying a portfolio giant stocks at discounted price during crisis to collect dividends and waiting appreciation of share price over the decades with quarterly monitoring of business performance.”

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Filed Under: Personal Analysis, Stock Market Tagged: investment styles, stock market, warren buffett

Bond Market vs Stock Market vs Cash

Posted on March 7, 2020 Written by Dr Tee (Ein55)

Bond, especially country level, usually is considered safe haven, therefore bond prices have been climbing up over past 4 decades (since the major correction in 1980s), resulting in extremely low bond yield, eg. only 0.74% for 10 years US treasury yield (dip due to 0.5% interest rate cut recently) while Singapore Saving Bonds is 2.12% for 10 years, how to fight against inflation which is average 2-3% yearly?

When global investors are afraid of stock market (not so bullish), then there is demand for bond, then it may not easily crash even prices are very high with little yield. However, when bond yield is so low (near to 0%) and there is increasing inflation, then money may escape from bond market to consider other higher risk and higher potential return market (eg. stock or property).

In general, corporate bond (especially with giant stock and strong business fundamental) is a better choice than country bond (yield is too low, safety could not justify the investment for long term) but focusing on short term bond (less than 12 months) to minimize the risk of possible bond market meltdown in future.

For bond, focus is more on safety (against risk of default) vs return (bond coupon rate). For stock, focus is on capital gains through business growth with consideration of share price which affects the investment yield. A smart investor would integrate stock and bond analysis through the common business. Focus mainly on giant bonds with giant stocks.

Cash is King when an investor has the capital to invest at the right time. However, when waiting period is too long, cash could only get little return (eg. bank interest of 1-2%). So, a balance is needed for percentage of cash (opportunity fund), stocks (especially holding for longer term investing to collect dividend with capital gains) and bond (for stability, either in stronger corporate or countries).

There are many ways of investment to growth the wealth. Learn from Dr Tee free 4hr course to position in 5 major investment markets: stocks, bonds, properties, commodities, forex. Register Here: www.ein55.com

Filed Under: Bond Market, Stock Market Tagged: bond market, cash, investing strategies, stock market

Airlines Stock Crisis: Delta Airlines vs Singapore Airlines

Posted on March 7, 2020 Written by Dr Tee (Ein55)

Both Delta Airlines (NYSE: DAL) and Singapore Airlines (SGX: C6L) are well known international airlines. However, choice of stock for investing is different from choosing airline as a passenger. We need to consider from investing perspective, both business performance and share prices.

Delta Airlines is a giant airline stock with strong business fundamental. No wonder Warren Buffett starts to collect more of this stock despite the price falls like a knife which he is not afraid to catch it as he believes the bleeding period is within his tolerance level to exchange for 1/3 discount (26% optimism, near to low optimism <25% but in downtrend direction, Ein55 members may monitor when it may recover again while optimism is still low).

Our dear Singapore Airlines is not a giant stock, fundamental is below average, optimism (28%) is approaching low (towards 25%) but long term potential is relatively weaker, more suitable for short term trading (when timing is right), not for investing.

Some smart investors select stocks as if choosing life partner, holding for long term to maximize the value of partnership, therefore won’t miss when the rare opportunity has come. However, no one would know the “perfect” moment (eg. the lowest price). For Warren Buffett, he just needs to buy with discount within his acceptable limit, buy low enough, no need to speculate the lowest price and he could hold till recovery in both business and share prices.

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Filed Under: Fundamental Analysis, Market Outlook, Stock Market Tagged: airline stocks, airlines, coronavirus, crisis stock, delta airlines, sia, singapore airlines, temasek, US Stocks

Winter Time of Global Airline Stocks

Posted on March 6, 2020 Written by Dr Tee (Ein55)

First major airline in trouble after only 2 months of Coronavirus crisis. Flybe is the largest regional airline in Europe, cannot even sustain a few months of winter time, may not able to “fly” again due to lack of funding.

At the same time, Warren Buffett is indeed different from others, holding to 4 major airline shares: Delta Airlines (NYSE: DAL), American Airlines (NASDAQ: AAL), Southwest Airlines (NYSE: LUV) and United Airlines (Nasdaq: UAL). In general, airlines sector stocks (NYSEAcra: JETS ETF) have dropped about 1/3 share price over the past 1 month from its peak. There is more downside with bearish short term stock market, both at Level 3 (US stock market under correction, even recent 0.5% interest rate cut by the Fed won’t help to recover the confidence) and Level 2 (less travelling, “doom” for airline, burning money each month).

“Be greedy when others are fearful” is correct in principle but may not be suitable for everyone as it requires more investing skills than expected. Warren Buffett could be greedy now (eg. buying more Delta Airline stock) during crisis because he has a deep pocket with strong holding power with diversification over many industries. However, it may not be wise for others to follow Warren Buffett exactly as each person has unique personality, financial condition and investing strategy. Warren Buffett’s Berkshire (NYSE: BRK) loses 50% share price during 2008-2009 subprime crisis but he could still sleep soundly each night. Others may suffer depression with 50% loss in capital.

For retail investors and investors with small capital, weak holding power and low risk tolerance level, it is relatively safer to follow trend for entry or exit. Airline stocks are usually cyclic in nature, main strategy would be buy low sell high. Currently it is only a Level 2 crisis (airline sector earning drops significantly), but if Coronavirus drags longer than 6-12 months, it could become regional crisis (some countries economy will be affected) or even evolving into the next global financial crisis.

If we don’t know Coronavirus well (how it started and when it may end), shorter term investing or holding cash as opportunity fund would be relatively safer. In the meantime, smarts investors have to start to search for global giant stocks with strong business fundamental which can last through the potential financial crisis.

Learn from Dr Tee free 4hr course on Crisis Investing Strategies (What to Buy, When to Buy/Sell), either for Coronavirus Crisis (affecting consumers related sectors such as airlines, retailers, tourism, F&B, transportation, etc) or global financial crisis (affecting all sectors and all countries in the world). Register Here: www.ein55.com

Filed Under: Macroeconomy, Market Cycle Investing, Stock Market Tagged: airline crisis, airline stocks, airlines, American Airlines, coronavirus, crisis stock, delta airlines, JETS ETF, Southwest Airlines, United Airlines, US Stocks

3 Main Undervalue Stock Investing Strategies (Benjamin Graham & Warren Buffett)

Posted on March 5, 2020 Written by Dr Tee (Ein55)

Value is what you get and price is what you pay. Indeed, undervalue stock investing strategy is as simple as shoppers buy familiar brands of products during sales (eg Great Singapore Sales in Jun-Aug, 11 Nov internet retailer sales, etc).

However, an investor may feel frightened when “discount” in stocks are incresing, eg. buying a stock with 50% price correction but it continues to fall, sometimes may not recover at all (bankrupt of company during crisis) or long period of low prices.

At the same time, a shopper seldom feel frightened when merchant B gives more discount than merchant A as a discount is already enjoyed, shopper knows that it is impossible to buy at the most discount.

This implies that there is a gap between stock investor and shopper, particularly related to mindset of value vs price. Let’s learn 3 main strategies in undervalue stock investing:

1) PB (Asset Method)

Price to Book (PB) ratio is share prices / Net asset value, a common way for smart investor to buy undervalue stocks with PB<1 or share price below net asset value for discount. This method requires high quality asset such as property or cash, not goodwill or licenses, etc.

The constraint of this method is an investor has limited selection of stocks (eg property or bank related stocks) and require patience to hold through the recovery phase.

Giant stock such as Hongkong Land (SGX: H78) is very undervalue with PB about 0.3 or 70% discount (price below valuation of net asset value). However, when investing during downtrend in share prices, there is more “discount” given, not limited to Hongkong Land, also commonly observed in many undervalue property stocks in Singapore and regional stock markets (eg Hong Kong, Malaysia, etc).

This method is more suitable for longer term investor (over 5-10 years) who ignore daily share prices. Benjamin Graham, father of value investing invented this method but it may not be suitable for everyone, especially short term Traders.

2) PE (Earning Method)

Price Earning (PE) ratio, share price over earning, is another common way for valuation, buying stocks with low PE.

The constraint of this method is limited to company with consistent growth. So, whenever there is a correction in share price during “crisis”, it would create a low PE opportunity.

However, this method may not be suitable for everyone as it requires good understanding of growth stocks with strong economic moat. Past historical low PE may not be a suitable reference (unlike PB<1 is a clearer criteria). Besides, each sector has its own average PE, eg higher for technology and healthcare sectors, lower for property sector. Therefore, it requires relative comparison of PE within similar sector among the peers.

Growth investing and value investing is just a fine line in between. Warren Buffett used to follow undervalue investing of his teacher, Benjamin Graham (asset method) in early years but found the choices of stocks are limited when share prices are much higher. His partner, Charlie Munger, encourages him to move towards growth investing, consider to buy an excellent business at fair price. This is aligned with teaching by second teacher of Warren Buffett, Philip Fisher, who view value as future growth, not limited to current asset.

Stock such as Apple Inc (Nasdaq: AAPL) has PE of about 22, considered “undervalue” within technology or internet sector. The stock may not be cheap in asset valuation, but it is undervalue based on future growth prospect.

3) Optimism (Ein55 Method)

Optimism is 1 of 55 Ein55 investing styles developed by Dr Tee. Optimism method is a unique way to integrate PE and PB methods, allow applications in all types of stocks, not limited to asset based or growth based. Optimism is ranging from 0-100%, a stock is undervalue when < 50% optimism, very undervalue when < 25% optimism, over price when > 75% optimism, fair value when near to 50% optimism.

For example, Hongkong Land is at 2% Optimism (very undervalue) while Apple is at 34% optimism (fair price). Optimism provide a quick and reliable way to integrate value and price together for investors to make decision. 50% optimism is an easy way of valuation for any stock.

However, Buy Low may get lower before one could Sell High. Therefore, it is crucial to integrate at least 5 Ein55 styles together with LOFTP Analysis:

L = Level Analysis (L1-L4)

O = Optimism Analysis (0-100%)

F = Fundamental Analysis (strong / weak)

T = Technical Analysis (Uptrend / Sideways / Downtrend)

P = Personal Analysis ( personality – short term trading or long term investing)

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Warren Buffett is a famous counter-trend investor (although sometimes he also follow “business trend” to buy stock such as Apple), the more share price drops, the more he would buy stocks with cash. His pocket is deep (Berkshire is an insurance giant stock, the premium collected from insurance provide enormous cash reserve for Berkshire through Warren Buffett to invest for higher return during crisis). If one has limited capital with low risk appetite, trend-following could be a better choice, wait for confirmation before trading or investing.

Haw Par (SGX: H02) is a giant stock (which also invest in other giant stocks of Mr Wee), hidden jewel of Mr Wee Cho Yaw, UOB Chairman. We have covered this stock in details several years ago in Ein55 charity course (Discounted NAV stock) and also in Ein55 mentor course on Fundamental Analysis (either course #1 or #2), share price was less than $9 (undervalue) then, with over 50% capital gains in a few years later.

I have studied the cross-holding structure of Mr Wee network of stocks and Jardine Group in Ein55 coaching several years ago and also briefly in this article:

Jardine Group and UOB Group with Cross-Holding Stock Network

Cross-holding structure can strengthen the control but if not a simple majority control (over 50%), it could break down one by one as well when 1 of the stock is controlled by competitor. So, we could see Mr Wee Cho Yaw has been increasing ownership in his network of shares over the past few years to strengthen the control, not just leveraging on cross-holding structure.

It is never too late to master the right ways of stock investing and trading, aligned with own personality. Take action now to learn 10 stock strategies in Dr Tee 4hr stock investment course (free but requires commitment to learn).

Filed Under: Fundamental Analysis, Stock Market, Value Investing Tagged: benjamin graham, investing strategies, undervalue stock, warren buffett

Impact of Central Bank Interest Rate Cut on Global Stocks

Posted on March 5, 2020 Written by Dr Tee (Ein55)

For most countries, cutting central bank interest rate is an easy way to help weaker economy. However, there is a limit, eg from current 2.5%, still could allow further 10 times 0.25% cut for Malaysia.

For US, the Fed just cut interest rate by 0.5% from 1.5-1.75% to 1.25-1.5%, only left 5 times 0.25%, before falling to negative interests rate as in Japan and Europe.

Interest rate cut in bear market or weaker economy (eg Malaysia) is a danger signal. Buy low may get lower for stock market. In general, Malaysia has 2% higher bank interest rate than Singapore. However, the gap now is narrower to only 1% difference. Bank stocks in Malaysia would suffer due to smaller NIM (net interest margin), therefore trend of share price has been bearish.

Interest rate cut in bull market or strong economy (eg US) could help to prolong the 11 years bull run but more suitable for short term traders as US stock market is unstable at high optimism, any black swan (eg Coronavirus, surprises in 2020 US presidential election, China economy slowdown affecting the whole world, etc). If the short term stock market in US is recovered or even achieve another new historical high in near future, both traders and investors may need to seriously plan for exit strategy with trend-following strategies.

Last 2 years of interest rate cut in US is a preventive measure to sustain the bullish economy against any potential market threat. However, the bullets left are limited for the Fed to cut the interest rate further, implying QE (Quantitative Easing) may be the limited few weapons left for future global financial crisis at the expense of inflation with depreciation in currency, etc.

Negative interest rate is not the end of the world (could be a shock) as Europe and Japan have experienced, could become a norm in future. However, central banks of countries would need to print money with QE or leveraging on other stimulus plans during next global financial crisis.

So, holding cash for long term without investment (stock, property, commodity, etc) would lose to inflation with low interest rate for long term in future. Bond also has gloomy future due to sibling low bank interest rate.

There is no free lunch in the world. Market gets the reward (interest rate cut) first, implying future has to pay back in other ways.

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Filed Under: Macroeconomy, Stock Market Tagged: interest rate cut, stock market

Read in Between the Lines for Financial Reports – Tesla

Posted on March 5, 2020 Written by Dr Tee (Ein55)

Tesla (NASDAQ: TSLA) is a young giant stock with electric car technology yet to be proven profitable in future. The company has been “losing” money or making net loss over the past 10 years, mainly due to tremendous R&D expenditure and investment to expand its business.

For emerging technology stocks (eg past young giants such as Alibaba, Facebook, etc), usually first few years or even longer period, company may suffer losses. Tesla has been “losing” money in terms of profit but sales or revenue has been increasing.

Young giant stocks may need to “burn money” in exchange for bigger market share, so that next time it can become an economic moat to start making big money. So, smart investors need to read in between the lines for financial reports, not just profit or loss.

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Filed Under: Fundamental Analysis, Stock Market Tagged: financial report, fundamental analysis, tesla, Transportation, US Stocks

Stocks with High Moral Standard

Posted on March 5, 2020 Written by Dr Tee (Ein55)

Buying a stock means one becomes a business partner. Therefore, some investors who may have high moral standard won’t invest in stocks with negative impression by society, eg smoking, drinking (alcoholic), gambling, etc.

These “lower” moral standard businesses usually are main contributors to country growth through payment of high tax. Quite many of them are also protected by economic moat with special and limited license (monopoly) from local government to operate. As a result, their long term growth is stable with little competition.

From investors point of view, some of these lower moral standard stocks could be excellent choice for investing. Tobacco stocks (eg. British American Tobacco, BAT of Malaysia Bursa) may not be a good choice due to declining number of global smokers after decades of health education. This is similar for soft drink consumption (bad for teeth), consumers prefer healthier drinks, so stocks such as Coca-Cola are affected in longer term.

There are many global giant stocks related to alcoholic drinks. Malaysia only issues 2 licenses so far to 2 local brewery, Carlsberg (Bursa: 2836) and Heineken Malaysia (Bursa: 3255). Both beer stocks are duopoly giants with strong business fundamental.

However, over the past 1 week, both beer stocks experiences “crisis” with falling of share prices by about 30%, not due to spreading of Coronavirus, but due to turbulence in Malaysia politics (sudden change in government). As a result, many blue chip giant stocks in Malaysia are falling down in share prices overnight while there is little change in business fundamental.

In fact, the consumption of beer could be increasing if some people may feel depressed over 3 crises at the same time (politics, health and bearish stock market). This is fear driven speculative action (some investors may afraid new government could be more conservative, may ban beer or alcoholic drink production in Malaysia).

Even gambling giant stock (Genting Group, Bursa: 3182), another “lower” moral standard stock is also falling down but this is not just fear driven, also weaker fundamental induced over the past few years, resulting in share price cut by half.

Both Altria (NYSE: MO) and Thai Beverage (SGX: Y92) are giant stocks at low optimism but induced differently. Altria (e-cigarette) has weaker business over the past 3 years while Thai Beverage is relative more stable and defensive.

Perhaps for every “SIN” stock invested, one may balance with another stock to save the world, eg healthcare or green technology, etc. There is a choice, both life styles and investment partners.

Crisis is opportunity when share prices fall down to low optimism due to market fear. However, Buy Low at wrong time may get lower in share prices. It is crucial to integrate at least 5 styles of 55 Ein55 investing styles: LOFTP (Level 1-4, Optimism 0-100%, Fundamental, Technical and Petsonal Analysis) to make individual unique decision (Buy, Hold, Sell, Wait, Shorting).

Learn from Dr Tee free 4hr investment course to position in global giant stocks (both Low and High moral standards, eg healthcare stocks which save lives) with potential Level 3 (country) and Level 4 (global financial crisis). Register Here: www.ein55.com

Filed Under: Stock Market Tagged: Altria, british american tobacco, Carlsberg, Genting, Heineken Malaysia, Thai Beverage

Real Market Crisis or Just Fear?

Posted on March 5, 2020 Written by Dr Tee (Ein55)

I just talk to my sister in LA, confirming California people (richest state of USA, about 1/3 national wealth if remember correctly) also feel fearful now of Coronavirus.

Last 1 week of global stock market correction was a reflection of such initial global fear. China, “leader” of Coronavirus crisis is on the way of recovery (estimated duration of 6 months from Dec 2019 to May 2020). For other countries in the world, there is lagging effect, eg Singapore started first Coronavirus case in late Jan, may end about 1 month after China. For US and Europe, there could be another 1 month lagging, so hot summer would be just nice if following similar exit pattern of SARS, cousin of Coronavirus.

Question is Australia and NZ would be winter then in Jun-Aug, if the global spreading could not end by Jun, it may become seasonal flu every 6 months, worst during cold winter when temperature is colder, most people would stay indoor, higher chances of close contacts for infection.

Singapore by right is a hot tropical country but due to artificial mini winter or autumn (aircon room), the condition is much worse than neighbouring countries of Malaysia and Indonesia along the equator.

Health crisis is usually more fear than actual harm. If the deadly virus may kill all human, then stock market is not important anymore. If not, it means the stock market will always recover when crisis or more precisely, the fear is over.

I read news that some people are worry of “Corona” beer as name is close to “Corona” virus. So, what is real crisis (fact-based harm) or just a fear due to ignorance? Remember, stock market is made of mass with all types of investors: smart, ordinary, ignorant, etc.

However, fear can be deadly. Corona beer belongs to AB InBev (NYSE, BUD), same company which owns Budweiser, share price fell about 40% over the past 1 month when global Coronavirus condition gets worse. AB InBev is the world largest brewery, also a giant beer stock. The fear of stock market and “Corona” has created an artificial crisis on this stock. Crisis is Opportunity if business fundamental is not much affected while the share prices falling.

Learn fact-based scientific stock investing strategies from Dr Tee free 4hr course, leveraging on market fear, converting into opportunity. Register Here: www.ein55.com

Filed Under: Macroeconomy, Personal Analysis, Stock Market Tagged: crisis, market fear

Reversed Stock Trading with Shorting

Posted on March 5, 2020 Written by Dr Tee (Ein55)

One “easy” way to make money in bear market is shorting of stocks, i.e. profiting from falling in share prices. However, shorting has hidden risk, even Jesse Livermore, the greatest trader, has lost most of his fortune, not because he does not know shorting but because he position too early and stock market 100 years ago was not as efficient as market today on placement of order (timing is crucial for shorting).

Here are a few critical points to read for those looking for “easy” money in shorting during the coming correction or potential global financial crisis.

1) S.E.T. Trading Plan

Similar to long (eg Buy Low to Sell High), trading plan is even more important to a trader for shorting, especially protecting the capital loss (eg price up 5% after shorting position, loss in shorting is significant with CFD leveraging). SET trading plan: Stop Loss (S), E (Entry), T (Target) on 3 critical prices. The plan has to consider position sizing to ensure the maximum potential loss is within own risk tolerance level.

2) Personal Analysis – Mind Control

A trader failed usually not because of no plan or making losses but because could not overcome oneself to execute the plan, eg a small loss could become bigger loss because of loss aversion. This is particularly risky for shorting.

3) Position Short Term

Long strategy could be any timeframe: short term, medium term or long term. For shorting, it is safer to start with short term, only when the downtrend continues (eg correction becomes a regional crisis or even global financial crisis in longer term), then short term would be naturally extended to longer term (position trading) until the downtrend has ended.

4) Weaker Fundamental

Shorting is reversed strategy, besides fear driven market fall, one may also choose stocks with weaker business fundamental (provided the counter has CFD). When both fear and weak business are combined, probability of falling is higher (to be confirmed by TA charts with Technical Analysis).

5) Level Alignment

Ideally, shorting of a stock (Level 1) can be aligned with bearish sector performance (Level 2), weaker country GDP (Level 3) or falling world economy (Level 4). However, when 4 levels are aligned, it becomes a known crisis, price may fall more than 50%. So, a trader could use TA price chart as early signal (eg downtrend), then use Level 1-4 analysis as confirmation to hold to shorting position. In between, possible to take partial profits in shorting.

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Trading is “easy” if one could follow own SET plan strictly. Trading is “tough” if one follows market and own emotions with daily news to trade. Shorting is not just for traders, it can be a tool for investors to hedge against own long position (avoid buy and hold with losses during global financial crisis, hedging through shorting to preserve the capital if not selling).

Long or Short? This is a choice but requires different and unique strategies aligned with trader psychology. Even if “easy” money with shorting may not be suitable for you during stock market crisis, you have the option to apply other 10 strategies (crisis investing, undervalue investing, growth investing, momentum trading, swing trading, etc) which you could learn from Dr Tee free 4 hours stock investment and trading course.

Filed Under: Stock Market, Trading Tagged: shorting, stock trading

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