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PLAYING THE MARKET-A NEW YEAR RESOLUTION
stocksmaster
#1 Posted : Friday, January 01, 2010 7:29:40 PM
Rank: Member


Joined: 9/26/2006
Posts: 377
Location: CENTRAL PROVINCE
I took time today to assess my investment position in shares for the period January to December 2009. As a passive investor, i usually hold onto my purchases rarely selling to take advantage of price flactuations. This approach did not serve me well in 2009!

I have always wondered wether a trader driven purely by margin trading can make money in the NSE (Without wiping all the gains in transaction fees!)

So today, January 1st 2010, I have decided to try and test this model of stock trading (margin trading).

I have set aside a trading float for purely speculative purposes and embarked on a project.

PROJECT OBJECTIVE: To attain a 50% growth in the principal amount within the year (1st January to 31st December 2010)

METHODOLOGY: The principal amount will be actively and aggressively traded throughout the year with at least one trade per month. Purchases will be limited to between 1 to 3 companies to ensure large share volumes. The investment design will be highly speculative.

BENCHMARKING: The progress of the project will be compared with the NSE index and reported monthly. The target 50% growth will also be a guiding factor.

Every purchase and sale together with its rationale will be documented in order to create a point of discussion and future analysis.

The year long journey begins on Monday 4th January 2010.





muganda
#2 Posted : Saturday, January 02, 2010 8:45:38 AM
Rank: Elder


Joined: 9/15/2006
Posts: 3,860
@stocksmaster, Interesting and Controversial. You know, I've come to believe that we all know what it takes to make money(perhaps you more than many) but we all lack the character to do it.

It's so easy: BUY LOW, SELL HIGH but we just don't do it - emotions/greed/fear just get in the way.

Look at 2009 for example, average investor knew prices had collapsed alot in 1st quarter of the year but... What about Safaricom, no one thought it would go bankrupt yet we knew below 3/= was a steal but... This would have been the best year to make the 50%.



In conclusion, almost any strategy could work as long as you're not covering up for indecisiveness or lack of character. For me, after looking at my trading weaknesses, I've purposed to:
-pick a stock after looking at it as business first,
-buy only if the price gives genuine margin of saftey (SCOM below 3/=, KQ at 15/=, MSC at 2.50 etc),
-wait patiently then use the market's fluctuations to my advantage when selling.

Gordon Gekko
#3 Posted : Saturday, January 02, 2010 9:22:28 AM
Rank: Elder


Joined: 5/27/2008
Posts: 3,760
@mugs, I like your theory, but your prices seem unrealistic. Do you genuinely see MSC at 2.50 again? I see it at 6.00 at worst, which is what Im targeting. KQ bus seems to have gone, and I doubt if it can hit 25 now.
I have put in a bit of change in Total at 29 and hope to get out at 34 just before announcement. I will then go back when ex and repeat the cycle again. Two cycles during the year should fetch at least 8.00, which is 30%, my modest target.
muganda
#4 Posted : Saturday, January 02, 2010 4:54:44 PM
Rank: Elder


Joined: 9/15/2006
Posts: 3,860
@Gordon Gekko according to my theory...
If we did not buy MSC or KQ in March when they passed the test in all 3 measures, then why bother now it's only reactive and not an exceptional buy. There must be another MSC or KQ happening right now or about to happen - I've often noted we all glare at it until it's too late then...
wanyina
#5 Posted : Saturday, January 02, 2010 5:49:22 PM
Rank: Member


Joined: 4/1/2008
Posts: 141
Any comment on Cooperative bank?Im in a big campaign to buy the stock trying to accumulate as much as i could...any suggetions?? from u guys??
sparkly
#6 Posted : Saturday, January 02, 2010 6:49:33 PM
Rank: Elder


Joined: 9/23/2009
Posts: 7,113
Location: Enk are Nyirobi
@muganda, for sfcom below 3 and msc at 2.50 baring a serious change in fundamentals, you will have to wait for the next severe bear in 20 yrs
Life is short. Live passionately.
VituVingiSana
#7 Posted : Monday, January 04, 2010 8:26:22 AM
Rank: Chief


Joined: 1/3/2007
Posts: 16,150
Location: Nairobi
Please keep us informed... the high fees also scare me...

It seems I take all the risk for the benefit of the broker, NSE & CMA...
Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
mukiha
#8 Posted : Monday, January 04, 2010 9:13:03 AM
Rank: Elder


Joined: 6/27/2008
Posts: 4,114
The commissions at 2.1% either way translate to a minimum margin of 4.3% for you to make any money while trading. You could reasonably use 5% change as your minimum.

In today's trading so far, only two stocks would meet that criteria; Sameer(up 6%) and Unga (down 6.6%).

The month of December saw 12 counters climbing by more than the 5% threshold and only 4 going down.

The climbers were:

East African Breweries +5.07%
National Bank of Kenya +5.41%
Kenya Re-Insurance Corporation +6.36%
Mumias Sugar Co. +7.03%
NIC Bank +7.76%
Standard Chartered Bank 8.78%
Equity Bank +9.54%
TPS Eastern Africa +9.76%
KenGen. +9.79%
Kenya Airways +10.85% 35
Athi River Mining +13.85%
Housing Finance Co +13.92%

And the descenders:

Williamson Tea Kenya -11.83%
Sasini Tea & Coffee -9.43%
Car & General (K) -7.28%
Safaricom Limited -6.19%

Clearly then, you have enough to chose from....
Nothing is real unless it can be named; nothing has value unless it can be sold; money is worthless unless you spend it.
VituVingiSana
#9 Posted : Monday, January 04, 2010 9:25:21 AM
Rank: Chief


Joined: 1/3/2007
Posts: 16,150
Location: Nairobi
@mukiha - Sameer might be liquid but Unga is not...

Now... say the 6%... so all I get is 1% while absorbing all the risk... that is why I figure short-term trading is a no-go area for me for now!
Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
the sage
#10 Posted : Monday, January 04, 2010 9:25:58 AM
Rank: Member


Joined: 11/20/2008
Posts: 367
I'll ageree with Muginda on emotions/greed/fear just get in the way.
Looking at the summarised report of the NSE, it was possible to make at leasst 100 per cent return on at least eight counters. Have to be bold even if I get burned, as Chandaria once told me, "failing as an entreprenuers is a must and not once but you learn, forget the sorrows and marshall on."
Guys, any predictions?
QD
#11 Posted : Monday, January 04, 2010 10:00:49 AM
Rank: Member


Joined: 8/5/2009
Posts: 597
@stockmaster well project but the law of behavioral finance has proved that investors me and you at times are emotional traders, following noisemakers (speculators) who distort stock prices, hold on loosing stocks hoping for the losses to reverse to gains and sell, time lag btw buy order and sell order by the brokers who are not very efficient.

all the above combined may mean not 50% principal growth but may be btw 10% to 20%.
The problem with the world is that the intelligent people are full of doubts while the stupid ones are full of confidence
stocksmaster
#12 Posted : Monday, January 04, 2010 5:25:03 PM
Rank: Member


Joined: 9/26/2006
Posts: 377
Location: CENTRAL PROVINCE
Activity 1:Date: 4th January 2010

PURCHASE: MUMIAS SUGAR COMPANY


Average Purchase price: Ksh 6.90


NSE INDEX : 3189.55

RATIONALE OF PURCHASE:Anticipating above normal 1st half financial results in late Jan/early Feb.

@ Deal......advice taken.

Left just the bare minimum.I'll be doing the updates using percentages.

the deal
#13 Posted : Monday, January 04, 2010 5:46:40 PM
Rank: Elder


Joined: 9/25/2009
Posts: 4,486
Location: Windhoek/Nairobbery
@ stockmaster its not good to reveal ur transactions like that...we dont want to laugh @ u if somethin goes wrong wit mumias...
sparkly
#14 Posted : Monday, January 04, 2010 6:23:31 PM
Rank: Elder


Joined: 9/23/2009
Posts: 7,113
Location: Enk are Nyirobi
@stockmaster, thats BOLD. Benjamin Graham however warns us of the futility of short-time selectivity: 1. Human fallibility 2. The competition. Simply put, your expectations might miss the boat by a river OR even if you are right, tens of thousands of other investors are thinking and acting likewise! All the best and Keep us updated.
Life is short. Live passionately.
muganda
#15 Posted : Monday, January 04, 2010 7:07:00 PM
Rank: Elder


Joined: 9/15/2006
Posts: 3,860
@stocksmaster, show of character - admirable - putting your money where your mouth is.
muganda
#16 Posted : Monday, January 04, 2010 7:07:14 PM
Rank: Elder


Joined: 9/15/2006
Posts: 3,860
@stocksmaster, show of character - admirable - putting your money where your mouth is.
VituVingiSana
#17 Posted : Monday, January 04, 2010 7:51:42 PM
Rank: Chief


Joined: 1/3/2007
Posts: 16,150
Location: Nairobi
I think @wazua should give @stockmasters a way to showcase all his buys/sells so we can follow it easily... I would want to bookmark the page rather than scrolling through the comments to find the trades!

Also... What is the total cash u plan to deploy? It helps us calculate your ROI...
Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
2012
#18 Posted : Tuesday, January 05, 2010 7:57:37 AM
Rank: Elder


Joined: 12/9/2009
Posts: 6,431
Location: Nairobi
@ stockmaster

I learnt my lesson the hard way two years ago. Buying low and selling high is not easy and not a preserve for the weak.
Think about it, everyone knows about buying low and selling high but when a counter is low there's doubt and we're not so sure about it anymore, so we lose out. A good example was Safaricom, even below 3/- people were still dumping creating a negative impression so people could only see doom instead of the bargain.
Right now there are many counters on SALE! question is are you bold enough to take a chance on these particular counters? I don't think so.

I have adopted a method I read somewhere which has proven to be effective and has given me good returns. Buy into counters that have a record of good management, innovativeness and pay good dividend. Don't buy with the intention of selling but investing in a good company and you won't go wrong.

Right now I'm able to take the risk and I'm using my gains plus annual bonus to take advantage of good counters which are currently on SALE.

Stand for something or you will fall for anything. Today's mighty oak is yesterday's nut that held its ground. Rosa Parks
sheep
#19 Posted : Tuesday, January 05, 2010 8:44:58 AM
Rank: Veteran


Joined: 7/24/2008
Posts: 781
I engaged in speculation the whole of last year after painstakingly studying the works of Jesse livermore and William O`neil.The Graham model had let me down big time although I still have faith in it.

Graham suggest that if you must speculate,have two accounts:one for value investing and the other for speculation but do not dare mix them-and I precisely do that.

I was able to speculate quite successfully last year by following Livermores methods;buying stocks that made new highs and adding more as long as the stock behaved right.I believe any aspiring speculator should study Livermores work before trying to speculate.

One should not trade oftenly,maybe 1-3 times a year.Never reinvest all your profits-thats all the money you`ll ever make,avoid taking profits in minor corrections and focus on the long term trend.There is a very interesting story livermore gives of a guy called Patridge nicknamed turkey which can be found here, http://the3500.wordpress...02/01/a-stock-operator/

My two cents



The utimate goal of investing is to buy low sell high;if we re-write this core equation in psychology terms it becomes buy fear sell greed.
Much Know
#20 Posted : Wednesday, January 06, 2010 11:14:54 AM
Rank: Elder


Joined: 12/6/2008
Posts: 3,469
@2012, i have observed this market so closely at least for 3 years now and yes it is possible to buy low sell high. There are certain trends in the NSE that seem to work by my estimates 80% of the time meaning on average you can expect to score 3%-10%(on high liquidity counters. These trends are very specific to the NSE. You will almost always run a profit on these trends.

Stockmaster. I welcome your idea to share your moves, i was seriously thinking of setting up a "copy cat portfolio", to save my brain thinking. it's clear Mumias is undervalued based on returns and funny enough it just stays that way. I would be weary of your bet, i don't know how increased capital expenditure for their alcohol and power plants will reflect (on the mighty who ignore this counter) when results are read. I would take a long term position though on this one.
A New Kenya
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