Market bottoms etc.

anubis · 1 Market bottoms etc. Tue Jul 31, 2012 1:29 pm

anubis

Senior Manager - Equity Analytics

Posts : 474
Equity Stars : 5387
Reputation : 31
Join date : 2011-03-21

While discussing some issues with RCL results, illuminati pointed out that many members of this forum predicted 6500 ASI to be the market bottom. This rang a bell to me and I dug up the following article:

http://www.lankabusinesstoday.com/stock-market/movement/592-lbt-markets-friday-forecastcharts

ASI was around 6500 when this article was written... and it also says:

"We would like to reiterate the fact that there is no way that anybody could go wrong buying at these absurdly low levels."

So, it's not just our guys who failed to pick bottoms!! Smile

Sometime back I asked the forum about picking bottoms: http://forum.srilankaequity.com/t5516-how-to-identify-the-bottom?highlight=identify+bottom fortunately I was pointed that there is no point in trying to pick the bottom.

Despite the market bottom, I have noted several interesting stocks. For an example, try buying couple of thousends of DOCK shares and see what happens to the price. Or if you noted, before UML results, it was difficult to buy 5000 shares without moving the price up significantly. Does this mean these shares have bottomed out??? Do you know any other shares with the same kind of pattern?? please share with the forum Smile

Cheers!

aj · 2 Re: Market bottoms etc. Tue Jul 31, 2012 1:58 pm

aj

Assistant Vice President - Equity Analytics

Posts : 766
Equity Stars : 5433
Reputation : 45
Join date : 2011-11-25

"We would like to reiterate the fact that there is no way that anybody could go wrong buying at these absurdly low levels."
The artcile was written by Sarath Rajapaksa, Capital TRUST Research (Pvt) Ltd

suja · 3 Re: Market bottoms etc. Tue Jul 31, 2012 2:04 pm

suja

Senior Manager - Equity Analytics

Posts : 338
Equity Stars : 5206
Reputation : 14
Join date : 2011-01-27

CTC is another example. Monopoly status would have helped the share.

UKboy · 4 Re: Market bottoms etc. Tue Jul 31, 2012 5:45 pm

UKboy

Senior Vice President - Equity Analytics

Posts : 1943
Equity Stars : 7330
Reputation : 391
Join date : 2011-02-08
Location : Earth

I can understand the difficulty behind collecting shares without moving the price up. But 9 out of 10 times the price would not stay in new level unless further demands rise. Say if you buy 5000 DOCK shares today, moving the prices up. I can guarantee that the price will be coming down in next few days. (I’m not talking about highly illiquid counters)

I don’t believe in brokers. Dealing with stock brokers is just an excellent way of passing your time.! Nothing else. So when I was in Sri Lanka I used to have a chat with them especially when I got really board. Majority have no idea about markets.
As a person Sarath Rajapaksha is a wonderful person I have no question what so ever about that. But last year he failed to understand that market was running out of steam. Same as many other brokers later he said that market is coming down & no short term recovery. But that point it was too little too late.
Sri Lanka broker huts failed to deliver the best to their small scale investors. On the other hand our retailers blindly believed these brokers. Small scale retailers were mesmerized by their broker’s fairytales. The result ... I think we all know. Many lost their money.

There are some members think that we all just registered in this forum. They behaved exactly similar to brokers. Some were expecting a bull run last year some early this year. Surprisingly later they said that they sold all their stocks few months back as they are not expecting a short term recovery.!

A market (in general) should overly correct before expect any genuine run.

anubis · 5 Re: Market bottoms etc. Tue Jul 31, 2012 9:50 pm

anubis

Senior Manager - Equity Analytics

Posts : 474
Equity Stars : 5387
Reputation : 31
Join date : 2011-03-21

@UKboy: Indeed, I hadn't thought about it that way. What you mentioned about price coming down back to original levels makes sense.

Cheers!

Slstock · 6 Re: Market bottoms etc. Wed Aug 01, 2012 12:51 am

Slstock

Director - Equity Analytics

Posts : 6610
Equity Stars : 13368
Reputation : 1158
Join date : 2011-01-22

UKboy wrote:
As a person Sarath Rajapaksha is a wonderful person I have no question what so ever about that. But last year he failed to understand that market was running out of steam. Same as many other brokers later he said that market is coming down & no short term recovery. But that point it was too little too late.
Sri Lanka broker huts failed to deliver the best to their small scale investors.

A market (in general) should overly correct before expect any genuine run.

Yes, also in addition I think Mr Rajapaksa' got over shadowed with his statements being more and more political then than being rational. I wish he would use his analytical skills to dig deeper into market without being over positive dragging political comments also into it.

Btw your bolded statement ( market over correcting ) is true.

Slstock · 7 Re: Market bottoms etc. Wed Aug 01, 2012 1:23 am

Slstock

Director - Equity Analytics

Posts : 6610
Equity Stars : 13368
Reputation : 1158
Join date : 2011-01-22

Yes Anubis, in this weak market as long as there are sellers to sell at shortest panic , these prices can come down again though they go up temporarily However we must note presently there are a few exceptions. Some of the stocks which hit low , like for example FLCH , BIL , RICH, HUNT, KAPI , LOLC in june when ASi hit lowest are trading 20-40% higher now. Not sure they will ever come back to those lowest levels unless something drastic, really bad happens. I saw some of these shares hitting their 5-6 year lows!

The thing about bottom is we really do not know the bottom untill some times passes to establish it was a bottom. Only thing we can do as a long term investors is to accumulate slowly when prices are attractive.

Ex: The PLC you naalysed much. Even if PLC has a YoY or QoQ earnings drop this time am not sure how much more it should drop . Okay say Rs 8 ( this is just am example). EVen then for a share trading at PE of about 5 and below NAV and below IPO of Rs 18, one would think that it has to pass atleast Rs 18 at some point. If you are long term investor ( not optimizing profit but looking at overall % gain) , will a 20-30% drop be massive issue compared to possible 100-200% gain at some point ( if we believe in a bull at some point) .I guess it all in the mind set what your goals are . Ofcouse for a trader these 20% drop is massive
Not sure companies like PLC with such a strong parents and state influence will ever get chances to trade at these prices again. In 5 years someone is going look back and say "sheesh PLc was at Rs 10 below IPO" I wish I bought then. Now it is Rs XX. I could have xxed my earning over bank/fd deposits. There maybe many such stories in the forum if we look back on 4-5 years past history.

Btw, this is not a promotion on PLC this is just to serve an example.

I think some strong minds and player are going to come out victorious in the long term with handsome gains. Few millionaires can be born out of this misery. Patience is the key ( also believing the country will not die) . But how many will survive and not leave CSE when the time comes ? When they return maybe the fun already started and the bus has run 20 miles ahead.

So coming back to the question. "How do you know the bottom ? " Only time can tell after we seen it go by in front of our eyes. When exactly I do not know, but myself being more of a medium/long term investor really am not worried too much. But lets also embrace any short term opportunity we get.

anubis wrote:@UKboy: Indeed, I hadn't thought about it that way. What you mentioned about price coming down back to original levels makes sense.

Cheers!

[b]

anubis · 8 Re: Market bottoms etc. Wed Aug 01, 2012 2:37 am

anubis

Senior Manager - Equity Analytics

Posts : 474
Equity Stars : 5387
Reputation : 31
Join date : 2011-03-21

@slstock: thank you for the detailed response Smile

PLC.N is the only share I hold in a long-term basis. But I do trade a little bit of that when the opportunity comes, but the majority is just sitting there like an fd... just earning dividends.

However, I also have a bit of cash just in case PLC.N comes down a bit more, who knows, everything is possible in these market sentiments.

Another issue for me is that I'm a retail investor, with limited capital. So, I kind of have to seek safe short-term opportunities because I want to increase my capital as well. Even if I get 200% increase of my existing capital in the long term, I'll still be a retail investor with limited capital at that point. I didn't think like this before, I had the mindset of being invested for very long-term periods, but now I'm thinking of short-term opportunities as well.

Cheers!

Slstock · 9 Re: Market bottoms etc. Wed Aug 01, 2012 3:49 am

Slstock

Director - Equity Analytics

Posts : 6610
Equity Stars : 13368
Reputation : 1158
Join date : 2011-01-22

Anubis,
I see nothing wrong in doing short term trading also. Blindly putting everything as long term is not smart I am sure. We need to monitor and adapt also.
Let hope we all get out of this lethargic market and have a fruitful years ahead.

Ps : To be frank, I cannot say this down market had not got to me and got me depressed at times, but I always try to find ways to adapt to make something out of what it is. I am also in the retailer league so we are all in this.

anubis wrote:@slstock: thank you for the detailed response

PLC.N is the only share I hold in a long-term basis. But I do trade a little bit of that when the opportunity comes, but the majority is just sitting there like an fd... just earning dividends.

However, I also have a bit of cash just in case PLC.N comes down a bit more, who knows, everything is possible in these market sentiments.

Another issue for me is that I'm a retail investor, with limited capital. So, I kind of have to seek safe short-term opportunities because I want to increase my capital as well. Even if I get 200% increase of my existing capital in the long term, I'll still be a retail investor with limited capital at that point. I didn't think like this before, I had the mindset of being invested for very long-term periods, but now I'm thinking of short-term opportunities as well.

Cheers!