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Tony Pow
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I share my experiences (good and bad) in trading stocks and results of thousands of trading simulations in my books. My primary book is The Art of Investing. ebtonypow.blogspot.com Retired early from IT and work full-time in investing. Develop strategies to trade. It is my passion to check out... More
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Tony Pow
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Debunk the Myths in Investing
  • My Amazing Quarter

    After finishing some new books and making quite a lot of money recently, I need to take a vacation. However, I feel I need to write this article asking for contributions to the victims in Nepal by buying my books. All my book royalties will be donated to them for a limited time.

    I would like to share my investing ideas using this quarter as an example. My quarterly returns are amazing comparing to S&P500 return of 0.95%. They are copied from my broker's account statement.

    Account

    YTD

    (as of 3-31-15)

    Cash %

    (as of 5/3/15)

    My son's account

    15.9%

    2%

    My taxable account

    3.3%

    7%

    Roth IRA

    3.7%

    33%

    Traditional IRA

    7.2%

    15%

    Rollover IRA

    3.7%

    36%

    It is even more amazing when you consider they are not totally invested as indicated by the Cash%. The accounts not included here are my Annuity and my 529 account to my grandchild that are not under my control. My wife's accounts are not included and they have similar YTD returns: IRA 3.4% and Rollover IRA 6.4%.

    I suspect there will be a lot of doubts on my performances from my experience on a previous SA article. After a year from the publish date of that article, the return beat S&P 500 by more than 100% as described in this article. Who said you cannot make money by reading Seeking Alpha?

    The following describes how I achieved these high performances from Dec. last year to today.

    Christmas comes early for oil stocks (so far)

    Where are the analysts predicting the oil price will go to $20 per barrel?

    No one (except God and the Middle East terrorists) can really predict the short-term direction of oil correctly. However, the long-term direction is clear. It will be up. When? One year, two years or three years. I can tell you exactly "when" when I fix my time machine.

    It is based on a simple supply and demand rule in Business 101. The demand is increasing due to the recovering economy and the rising population. The diminishing supply is due to a limited resource especially with today's decreasing investing. Shale gas/oil most likely cannot be profitable at the current price.

    Many oil companies are fundamentally sound with the exceptions of drillers and explorers. I recommended buying OIL when it was $30 (about the same as today's oil price adjusted to inflation). It went down to $15 or so and the rest is history. When we do not learn from history, we will repeat history. I put money where my mouth is:

    Oil or related stock

    Return

    (as of 5-3-15)

    Bought

    OAS

    21%

    12/05/14

    SM

    60%

    12/04/14

    SM

    65%

    12/04/14

    TPLM

    47%

    12/04/14

       

    PBR

    42%

    01/28/15

    REX

    11%

    02/20/15

    LRE

    10%

    03/04/15

    OIL

    30%

    03/17/15

    OIL

    28%

    03/16/15

    PBR

    68%

    03/27/15

    Some PBR shares were sold with about 20% loss to offset the short-term gain (40%) of BIIB. The current shares of PBR and LBE were sold from my taxable account. LRE was sold with a small loss due to not wanting it in a taxable account (extra work for filing tax returns). Gained 20% on VLCC bought in 12/08/14. Many of these stocks were bought as the year-end losers that showed high appreciation potential.

    I do have XOM (sold) and CVX. They are about breaking even. They are diversified, integrated oil companies. As expected they do not move a lot with the price of oil.

    The annualized returns (that should be used for comparison) are even far higher.

    China connection

    Oil represents a good percent of newer purchases and China stocks represent another. FXI is recommended in my SA article on China. FXI, EWH and HAO (small cap Chinese stocks) were bought briefly after the publish date (11-5-2014) of the article. Again, reading SA may make you money.

    China or related stock

    Return

    (as of 5-3-15 if not sold)

    Bought

    Sold on

    FXI

    32%

    11/17/14

     

    EWH

    12%

    11/19/14

     

    HAO

    28%

    11/20/14

     

    XIN

    15%

    11/04/14

     

    XIN

    34%

    11/17/14

     

    XIN

    18%

    11/05/14

     
        

    GLUU

    91%

    01/28/15

     

    NHTC

    58%

    03/04/15

    04/10/15

    PME

    -16%

    03/12/15

     

    NHTC had a great run. It may still go up. GLUU is in gaming industry. It may still have a lot of appreciation potential. XIN is under priced even after its recent upswings. The ghost city and the frauds of small Chinese companies give us a good price to enter. PME is a loser so far. I'll still keep it for a while. Most rivers in China are polluted. Chinese depend on deep-sea fishing and PME is in this business. However, China and Indonesia has a dispute in the fishing territory. I bet it will be resolved as Indonesia's economy depends a lot on China.

    Short squeeze on chicken stocks

    I have losses (less than 10 %) on PPC that I have a huge bet expecting a short squeeze. It has an incredible high short percent of about 50%. Besides its fine fundamentals, the long-term prospect is good:

    · Chicken is cheaper and more nutritious than beef and pork.

    · Bird flu can be easily contained and isolated. Most chicken are raised in door and under good control.

    · In Hong Kong, when there is an outbreak, normally they only control live chicken, not the frozen ones.

    · Stopping chicken import by foreign countries is more a political game to me.

    New purchases

    Do your due diligence and you may find some gems from my recent purchases.

    Recent purchases

    Return

    (as of 5-3-15)

    Bought

    AA

    11%

    03/27/15

    CENX

    6%

    03/31/15

    SPWH

    19%

    03/31/15

    AMAG

    -8%

    04/01/15

    GME

    6%

    04/06/15

    PLUS

    -2%

    04/06/15

    POZN

    5%

    04/06/15

    RDN

    3%

    04/06/15

    STX

    52%

    04/15/15

    SKX

    25%

    04/22/15

    USCR

    -1%

    04/30/15

       

    Here are my five steps in evaluating stocks.

    · Search stocks from proven screens.

    · Fundamental analysis.

    · Intangible analysis.

    · Qualitative analysis.

    · Technical analysis.

    I have about 20 screens and I'm currently using 10 screens that have been proven recently. I usually can get about 10 stocks from the ten screens. After the initial fundamental analysis, I can get about 5 stocks. I only do more analysis if the stocks look promising.

    Technical Analysis is good to detect market plunges. For me, it does not work as I am looking for stocks with high values and not the trends.

    Other stocks

    I have heavy bets on UVE and SWKS. They are doing great. I do not know whether they are peaking or not. However, I will take some shares off the table. QRVO has a return of 72%. The prospect still looks great with the demand from credit card chip functions. MU and SNDK are profitable but they have lost a lot of their luster recently. I also have heavy bet on GILD and it has not taken off yet.

    I unloaded some TTWO, a heavy bet. Currently their average return is 45%. Its stock price depends on the cycle of its major video game. I unloaded all my shares of AAL. I double bet it and it returned 200% just over a year, my best return I sold this year.

    My son's account

    His one-year return is 33.5% vs. S&P 500's 12.7%. It is the best among all of my accounts and it will be a model for my other accounts. The current improvement is due to several changes:

    · The stocks with the highest scores may not be the best performers. Second best scored stocks seem better.

    · Fully participated in investing stocks when the market is not risky.

    Currently it has the following stocks: ARTX, BIDU, FONR, LUV, SFNC, SWKS and UVE.

    2015 and beyond

    I am cautious this year but I will be very careful next year in timing the market. From my memory, we do not have a down year in a year before election including 2007. When the Fed hikes the interest rate, the market will fall like a deck of cards and it will be amplified by the record margin debt.

    Many experts including a best seller tell their readers to abandon stocks, some as early as 2009. If you followed them, you would have lost all the profits from the recommendation date to now. My simple technique tells you to invest fully since September, 2009. I play corrections by buying during dips and selling during upswings. When the market plunges, sell everything. Usually the plunge takes longer than one year to reach the bottom. The average loss of the last two market plunge is about 45% and followed by the most profitable time to buy stocks.

    Conclusion

    Hope I have shared some of my investing ideas.

    · The media amplifies the news. When the oil price is dropping, they just predict a higher loss in order to sell their stuffs.

    · Selling a loser in a taxable account and buying it back in a retirement account avoids wash sale.

    · Small stocks though risky have chance of larger appreciation. However, when the market starts to plunge, they should be the first ones to sell from my experiences.

    · Chinese stocks are risky but they have been highly profitable in the last year.

    · I prefer to churn my portfolio so I have better appreciation potential with newer info. If I do not sell, where can I get money to buy new stocks? One's strategy.

    · Selling a stock does not mean you will not buy it back. We should be emotionally detected to any stock.

    · Expect losses. Nothing risked, nothing gained. When the market is risky, reduce purchases and sell some stocks whose fundamentals have deteriorated.

    The following is from my book "How to be a billionaire" and it is used to conclude this article.

    "We come to this earth with nothing and leave with nothing. Why do we fight for wealth, prestige and power? However, if we do not have the objective for wealth, prestige and power, it is a life without meaning. In addition, money should not be our primary objective in life and happiness/health has to be earned and cannot be bought with money."

    Now, you are ready to set your objective, enjoy and help the victims in Nepal on your road to wealth.

    This article is dedicated to those who help the victims in Nepal.

    Tags: long-ideas
    May 05 8:49 AM | Link | 6 Comments
  • My Market Prediction For 2013

    In the article "My prediction for 2013 - all other predictions will be wrong", Larry Smith, a respected contributor at Seeking Alpha, proved that most yearly predictions by known organizations and famed individuals are often wrong. I agree with him whole-heartedly, but there are exceptions and I hope to be one of them. We can profit a lot from an accurate prediction.

    My past prediction

    Why should you want to follow a prediction from a nobody like me? My predictions have been on track many times, particularly for the year 2000, 2003 and 2009. In 2012, SPY (similar to S&P500 index) has a return of 13%. My prediction is 10%, off by 3%. Actually I could be very close to 100% correct if the bill on Fiscal Cliff was not passed, which would have the opposite effect on the market.

    Click here for the blog for my 2012 prediction, which has been posted as comments in Seeking Alpha many times.

    My prediction for 2013

    First, I do not do any research. I try to digest the experts' views (especially those with good arguments), add my own opinions and make a conclusion. We should review the prediction at three-month intervals and make adjustments. Market conditions constantly change -- it is not beneficial to maintain the original prediction that was created in the beginning of the year.

    Being said, I predicted that the SPY would rise by 12% for 2013 disregarding dividends. I regard the S&P500 (SPY is an ETF based on this index) over the Dow as a more accurate overall market representation.

    I predicted that the market would decline by about 3% in the first quarter and then climb back up to 12%. The bill on the fiscal cliff has been passed but the root problem has not been fixed. The problem is our high debt. We will face several hurdles such as cutting further expenses and raising more revenues. Raising the debt ceiling is not a long-term solution. The market will fluctuate when the next hurdle surfaces. With this, I predict a volatile market until mid year.

    Corporate profits on Q1 will not be better than expected but will in later quarters. Apple and its partners could be the exceptions with new profits from selling iPhone5 in China and newer markets in Q1.

    After mid year, there are many reasons that the market will improve.

    1. The EU should have solutions to their crisis. The market will react favorably even though the solutions are not good for some citizens and some countries.

    2. China's economy should have improved and its internal market is growing fast. It has fixed a lot of serious problems in the past, so I do not bet against that. When China recovers, its import partners of raw materials from Australia, Brazil… will also recover.

    3. Japan and India will not recover in the same pace as the rest of the world. Japan needs more citizens while India needs less. Japan's trade is suffering from the islet dispute with China.

    4. QE3 and low-interest rate would lead the recovery this time. We will see how the debt ceiling and the fiscal cliff affect the flow of money. Will China be the sucker again in lending us the 'monopoly' money? China wants our trade for creating jobs at a high price. However, the Chinese must be calculating whether it is worth it or not.

    5. Corporate profits will be increased, especially the global companies after Q1 if China recovers. We are all globally connected. A richer China means more iPhone and iPads sold to Chinese for example.

    6. The USA may be on the road to energy independence with the shale oil and shale gas. We have to see how the extraction damages our environment. The pipe line sector will be an important but neglected so far. Without them, the extracted fuels go nowhere.

    7. The two wars are ending. Hopefully they do not drag any longer.

    Predictions #6 and #7 would lead us to start a secular bull market starting as early as 2016. A secular bull market usually lasts about 20 years. The last one (about 1980 to 2000) is most likely caused by the lack of war.

    If there is any war with USA, then all bets are off! President Obama, take notes.

    Good and bad sectors for 2013

    Good sectors: Technology, Large Cap, Housing and Health Care (depending on the impact from ObamaCare).

    Bad sectors: Utilities, Consumer Staples , Defense and Dividend Stocks (whose value has been above its historical average).

    Risky but profitable sectors: Depending on China: Energy, Coal, Copper, and most other industrial minerals. Financial.

    The benefits of a yearly prediction

    It is used to plan how to invest for the coming year. If the outlook is rosy, commit more money on equities and invest aggressively, and vice versa. Upon a prediction of a recession recovery, an over-weighted equity portfolio is suggested. As my best investing years were 2003 and 2009-- years of recession recovery.

    Mid-year action

    Portfolios need constant manipulations as my mid-year action adjustments for 2011 and 2012 were prudent. I did not adjust both times, but they might provide valuable lessons. The rear mirror is always clearer.

    I predicted 10% for 2012. SPY is about 13%, so it is quite good.
    I predicted 6% for 2011. It is about 2%. It is a little off, but it is still on track.

    The mid-year (July 1) audit for 2012. The SPY's annualized return was 14% (7% YTD) and it was 4% (= 14 - 10) above the predicted 10%. However, we should still have another 3% return (= 10 -7) for the rest of the year according to my prediction. Hence, we should not be too concerned. In reality, it gained about 6% from July to the end of 2012.

    The mid-year (July 1) audit for 2011. The SPY's annualized return was 8% (4% YTD) and it was 2% (= 8 - 6) above the predicted 6%. The SPY should lose 2% (= 6 - 8) for the rest of the year according to my prediction. In such cases, the portfolio needed to rest in cash, be conservative and/or buy contraETFs. If that were done, we would avoid the 5% loss from July to the end of 2011.

    Conclusion

    My last recent market predictions were good for 2011 and 2012. The market was not rational for some years. I do not predict that my future predictions including the one for 2013 would work every time. Market prediction is not a precise science and the constantly changing dynamic factors alter the landscape. However, it is better to stick with a good prediction than not, and in the long term, it works.

    Act on current events being surfaced and adjust our portfolio prediction accordingly.

    Disclaimer. I am no responsible for your actions in your investment. Treat this article as educational information and past performance does not guarantee future performance.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Jan 08 2:16 PM | Link | 7 Comments
  • Rising and falling sectors
    As of 5/29/2011,

    * Rising.
    - eBook.
    - video games.

    * Long-term rising.
    - energy
    - commodities
    - health care.
    - agriculture
    - water


    * Falling.
    - traditional publisher
    - newspaper
    - commercial REIT (could be good value)


    However, if a correction of 5-20% is coming, the best investments are contraETFs, shorting stocks and cash. Market timing is an art more than a science. We bet the above with our best educated guess which should work most of the time, but NOT all of the time.

    (c) TonyP4 2011

    #####
    Disclaimer: All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.
    May 27 10:59 AM | Link | Comment!
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