Author Archives: bullbear

Mamee-Double Decker’s privatisation on track

Thursday April 14, 2011

Mamee-Double Decker’s privatisation on track

MAMEE-DOUBLE Decker (M) Bhd has been in the limelight recently due to a privatisation proposal by major shareholders in a selective capital reduction (SCR) and repayment exercise under Section 64 of the Companies Act, 1965. This is a privatisation route that has been used successfully by several other companies.

Some examples are Halim Mazmin Bhd and Telekom Malaysia Bhd (TM) unit VADS Bhd, both of which were de-listed in 2009.

Jupiter Securities head of research Pong Teng Siew says for some companies, the SCR is a preferred method for privatisation as the company foots the bill to pay off minority shareholders.

“Perhaps one out of 100 companies will use this method rather than making a general offer. Normally companies that use this method are quite strong financially. Also, the company would have strong cash flows, a good track record over the long term, the share is undervalued (cheap in context of price to earnings ratio – PE). A good yard stick would be share price to cash flow ratio.”

However, Pong pointed out that the company’s gearing level can balloon substantially if the SCR was successfully concluded.

Affin Investment Bank Bhd research head Andy Ong shared a similar opinion.

As far as the offer is concerned, most analysts agree that minority shareholders of Mamee-Double Decker are getting a “fair deal” based on the capital repayment offer of RM4.39 per share, which as pointed out by Jupiter Securities, represented a 21.9% premium over the last traded price of RM3.60 prior to its trading suspension and 2.6 times book value as at end-Dec 2010.

The research house points out that the offer is 9.2% lower than the firm’s fair value of RM4.75, which is based on 13 times price to earnings ratio (on FY11 projected earnings per share of 36.5 sen.

Mamee-Double Decker’s shares surged 17% or 60 sen on Monday to close at RM4.20 following the announcement.

However, there was no change in the closing price of Mamee-Double Decker’s shares yesterday which had a day high of RM4.21. The volume traded yesterday was also low at 199,500 shares.

Jupiter Securities said “at the closing price of RM4.20, the stock is still about 4.3% away from the offer price of RM4.39. With the time needed to complete the deal estimated at six months, annualised return at current price is slightly in excess of 8%.” The report added that the risk of a non-successful conclusion of the privatisation was low, as the offer price is at 22% above the pre-suspension price.

Mamee-Double Decker in its announcement last Friday, had said “the board is concerned about the trend of increasing raw material prices as well as foreign exchange volatility amidst the uncertain economic environment.

Mamee-Double Decker plans to fork out RM100mil capital expenditure this year to upgrade its facilities and machinery in Malacca.

The company also noted that its shares had been thinly traded.

Jupiter Securities said “the low trading volume arose from a “chicken and egg” situation where fund managers that are interested in the stock are unable to get meaningful amount of shares without driving the price up. On the other hand, the controlling shareholders with a 71.9% stake are unwilling to part with their holding at a give-away price.”

Hence, the privatisation would help resolve the valuation issue for the major shareholders and permit minority shareholders to exit at a premium to the market price.

However, the privatisation exercise, if successful, would result in a substantially higher level of gearing.

Under the plan, major shareholders of Mamee-Double Decker who control the company would repay RM179.8mil or RM4.39 a share to minority shareholders.

The report said there was a possibility that post-privatisation, a new equity partner would take up a substantial stake in the company and would provide the funds for its expansion and reduce the gearing. It further speculated a possible re-listing of Mamee-Double Decker a “few years down the road.”

http://biz.thestar.com.my/news/story.asp?file=/2011/4/14/business/8478809&sec=business

Muslim BRIC has arrived

Published: 2011/04/12
THE investing and financing world is about country linkages that are economic and financial opportunities clustered as growth stories. The most recognised country linkage is BRIC (Brazil, Russia India and China): it conjures mental images of geographies, growth, size, demand, etc.

Another term that is increasingly invoked by businesses looking for opportunities is ‘RDE,’ or Rapidly Developing Economies, and includes examples of Brazil, China, India, Mexico, and so on. To put theory into practice, globally committed firms, like Thomson Reuters, have established positions like Global Head of RDE.

But, as this column is about Islamic finance, Halal industry, and Muslim countries, we now need to think a ‘Muslim BRIC.’ But, why? The simple answer is ‘why not,’ but the relevant answer is the present Muslim country clusters news and information is more about coverage than investing and trading opportunities.

The acid test is this; are Muslim country investors, from middle class to high net-worth to institutional, investing in a meaningful way in fellow Muslim majority OIC countries like Albania, Benin, Comoros, Gabon, Kyrgyzstan, Mali, Niger, Somalia and/or Yemen? 

Today, we have 57 Muslim countries and 1.6 billion Muslims, we need a Muslim BRIC that conjures similar focused images of potential, opportunity, and accessibility. We can look at the Silk Road countries, OIC (Organisation of Islamic Conference) countries, CIS (Commonwealth of Independent States) countries, and so on, yet, outside of conferences in or about Muslim countries, such clusters are not capturing the investors’ imagination or attention.

SAMI

On April 4, Thomson Reuters, along with their partners, IdealRatings, and World Halal Forum launched the SAMI Halal Food index. The SAMI Halal food index stands for Socially Acceptable Market Investments. 

The index is about the beginning of convergence between Islamic finance and Halal industry. But, more importantly, its about Muslim country inward investing as Muslims, presently as ‘consumer investors’ in these halal food firms become shareholder investors.

Now, within the ‘BRIC context,’ SAMI stands for Saudi, Ankara, Malaysia and Indonesia. Without getting into the multitude of economic and financial numbers for these four countries on GDP growth, inflation, foreign direct investment, exports, debt capital market development, population growth patterns, and so on, we have a compelling established emerging market that happens to be Muslim countries on the old Silk Road.

Branding

The question is why the SAMI acronym? As with any branding exercise, it comes down to recall, recognition and reach whilst conveying a visual message of sustainable and scalable opportunities. The opportunities have become increasingly de-linked from the political minefield commonly found in emerging markets, which happen to be all Muslim countries.

Some general observations about SAMI countries include:

1. Three countries are G-20 countries: Saudi Arabia, Turkey (Ankara), and Indonesia. But, these countries are also the anchors for their respective geographies; Saudi Arabia for GCC (6) countries, Indonesia for Asean (10) countries, and Turkey for (5) CIS countries and beyond. These regions, especially GCC and CIS, may be viewed as pre-RDE countries.

2. Malaysia is the recognised global leader in both Islamic finance and Halal Food. Much has been written about Malaysia’s achievements, but the real take away message for any country, Muslim or non-Muslim, wanting to be a hub, is the holistic and consistent approach of the country on the two inter-related sectors.

3. Saudi Arabia is the world’s largest oil producer and largest halal food importer. The political crisis in the Arab world has shown the importance of Saudi Arabia, as the country stepped up oil production to offset the loss of Libyan oil from the markets. 

4. Indonesia has the largest Muslim population and growing

Meanwhile, Turkey is the ‘sizeable’ bridge to the east and west, as led by the present Islamist party.

Indexes & MNEs

One of the many spin-off possibilities here is a four country SAMI equity indexes for syariah-compliance, halal and conventional food.

Much like BRIC indexes convey a pulse of health, opportunities, fund flows, etc, the SAMI indexes will present not only ‘conventional,’ but Islamic and halal food (consumer non-cyclical sector) opportunities, information and insights.

From Indexes come firmsthat become the alter-ego of the country. The Financial Times had an interesting observation on Multinational Enterprises (MNEs) from RDEs, like Petro-China, Embraer (Brazil), Wipro (India), as these firms have become global brands and country ambassadors in a short time. 

The ‘good will’ created and disseminated globally by such firms about their countries has detached them from the political landmines associated with emerging markets.

In the Muslim world, according to Dinar standards (DS), Muslim MNEs, as part of the DS-100 index, may be the next hidden gems for all investors. Thus, firms like Petronas, Emirates Airlines (Dubai), Kuwait Finance House (Kuwait), Ulker (Turkey), Indomie (Indonesia), and others represent tomorrow’s Muslim country global ambassadors of investable opportunities.

Thus, the Muslim BRIC, SAMI, has arrived in Malaysia.

The writer is global head of Islamic Finance for Thomson Reuters, based in New York.

Read more: Muslim BRIC has arrived http://www.btimes.com.my/Current_News/BTIMES/articles/SAMI/Article/index_html#ixzz1JGV7W0Tr

Mamee-Double Decker offer seen as fair

Tuesday April 12, 2011

Mamee-Double Decker offer seen as fair
By THOMAS HUONG
huong@thestar.com.my

Analysts say privatisation price of RM4.39 per share acceptable

PETALING JAYA: While minority shareholders have the right to reject the offer to privatise Mamee-Double Decker (M) Bhd, analysts contacted by StarBiz say the capital repayment offer of RM4.39 per share is a fair deal.

Last Friday, the major shareholders of Mamee-Double Decker, who own 72% of the company, proposed a privatisation of the company via Section 64 of the Companies Act, 1965, which entails a capital reduction and repayment.

Such a proposal will require the approval of 75% of the minority shareholders of Mamee-Double Decker. In other words, the Pang family, which controls 72% of Mamee-Double Decker, will not be able to vote on this proposal.

An analyst from Kenanga Research recommends that shareholders accept the proposal as the offer price is at a historical price to earnings ratio (PE) of 15 times.

“The offer is attractive as our fair value is RM3.65 a share,” he said.

Another analyst from a local research firm pointed out that Mamee-Double Decker had plans for a RM100mil capital expenditure (capex) this year to upgrade its facilities and machinery in Malacca.

“A substantial capex may result in higher borrowing costs, which would affect dividend payments,” he said.

Mamee-Double Decker has a gross dividend yield of 2.62%, according to Bloomberg data.

The company itself had articulated this in its announcement of the exercise, when it said that “to fund the capital expenditure, the group may need to incur higher bank borrowings and this may result in higher borrowing costs which will then affect the dividend payment capability of Mamee-Double Decker in the immediate term.”

The company also noted that its shares had been thinly traded. In its announcement on Friday, Mamee-Double Decker pointed out that the daily average trading volume of its shares over the past one year was approximately a mere 0.22% of its total free float.

It said that given the “challenging environment and low trading liquidity” of its shares, the selective capital repayment represents “an opportunity for entitled shareholders to realise their investments in Mamee-Double Decker at an attractive premium above the historical trading prices.”

Another analyst said his research firm has maintained a fair value of RM4.44 a share for Mamee-Double Decker.

“Despite this, we still recommend acceptance of the offer of RM4.39 a share at this juncture,” he said.

OSK Research analyst Eing Kar Mei shares the same view.

“Our target price, based on FY10 results, was RM3.44 a share.

“Also, there are concerns over rising commodity prices, and margins may be under pressure as the company plans to spend a substantial amount on upgrading and expansion exercises,” said Eing.

However, Eing pointed out that the privatisation plan was far from being a done deal as Mamee-Double Decker needed to obtain approval from 75% of the remaining minority stakeholders.

To be noted is that the controlling shareholders, namely the Pang family and associated parties, would waive their entitlement from receiving cash under the capital repayment exercise.

OSK Investment Bank Bhd and OCBC Advisers (Malaysia) Sdn Bhd are the principal adviser and the financial adviser respectively for the exercise.

Mamee-Double Decker’s shares surged 17% or 60 sen yesterday to close at RM4.20.

http://biz.thestar.com.my/news/story.asp?file=/2011/4/12/business/8462902&sec=business

Related:
Almost as many companies taken private as IPOs the past 6 months
http://myinvestingnotes.blogspot.com/2011/04/almost-as-many-companies-taken-private.html

“There are multiple reasons why companies are taken private. For instance, the owners of a company sees value in a company and will rather privatise it so that the profits can be kept for themselves. Also, some owners may want to list the company in other markets such as Hong Kong as they seek out better value,”said TA Securities Holdings Bhd head of research Kaladher Govindan.

Almost as many companies taken private as IPOs the past 6 months

Tuesday April 12, 2011

Almost as many companies taken private as IPOs the past 6 months
By JEEVA ARULAMPALAM

PETALING JAYA: Although the number of initial public offerings on the local stock exchange doubled to 29 last year from 2009 and the first quarter of this year has seen nine companies list, there was also a sizeable number of companies being taken private.

In comparison, 13 companies have been listed on the Main Market of Bursa Malaysia since last October to April this year while over 10 Main Market companies received privatisation proposals in that same duration.

Aberdeen Asset Management Sdn Bhd managing director Gerald Ambrose said a reason for the slew of privatisation was because those stocks were trading at valuation discounts in comparison to regional peers.

He added that aside from companies being undervalued by the local market, another rational was that “we are on the cusp of a corporate spending cycle”, since the corporate sector has been largely cashed up.

“There are multiple reasons why companies are taken private. For instance, the owners of a company sees value in a company and will rather privatise it so that the profits can be kept for themselves. Also, some owners may want to list the company in other markets such as Hong Kong as they seek out better value,” said TA Securities Holdings Bhd head of research Kaladher Govindan.

He added that as with government initiatives undertaken to attract foreign direct investments into the country, there should be policies or incentives to make it more attractive to keep companies listed here, especially since their operations are based domestically.

A popular route used for such privatisation proposals by its major shareholders, notably in the last six months, was the takeover of assets and liabilities of the listed entities, including Sunway Holdings Bhd and Sunway City Bhd, PLUS Expressways Bhd, Emivest Bhd, Leong Hup Holdings Bhd and Asia Pacific Land Bhd.

For instance, Sunway Group chairman Tan Sri Jeffrey Cheah and his daughter proposed to take over the assets and liabilities of Sunway Holdings Bhd and Sunway City Bhd (listed on the Main Market) late last year through their own vehicle Sunway Sdn Bhd. After the privatisation of both these companies, the plan is to list Sunway Sdn Bhd sometime this year.

Other companies to have more recently received privatisation proposals include Berjaya Retail Bhd and Mamee-Double Decker (M) Bhd.

While the number of listings may be comparable to the quantum of companies being taken private, it must be noted that there were two significant listings Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE) and Petronas Chemicals Group Bhd by market capitalisation in the final quarter of last year. Both companies are Petronas-owned.

As at yesterday, MMHE and Petronas Chemicals had a market capitalisation of RM10.99bil and RM53.32bil respectively, while the latter is a member of the FTSE Bursa Malaysia KL Composite Index.

However, industry players note that companies being taken private equal less stock options for investors in the market and will not bode well for overall market sentiment.

Over the last nine years, the total market capitalisation of Bursa Malaysia had grown at a rate of 10% per annum, while stock markets in Indonesia and Singapore had grown at 24% and 17% respectively.

Malaysia’s MSCI Asia excluding Japan weighting has shrunk to only 3.2% from 6% in 2000, causing international fund managers to disregard Bursa.

To add to this, Bursa’s liquidity has lost its vibrancy, with its liquidity ranking in Asia dropping from third in 1996 to 14th this year. There is also limited diversity in the market, be it in terms of products or currency.

Invest Malaysia 2011, which starts today over a two day period, is expected to see the unveiling of several highly anticipated IPOs which include the listing of several units under Felda Global Ventures Holdings Sdn Bhd.

Smoothing sailing for Coastal

Posted on April 9, 2011, Saturday

GIGANTIC: One of Coastal’s offshore landing craft. The company was keen in venturing into new 
areas such as fabrication, repair and maintenance to enhance shareholder value.

KUCHING: Coastal Contracts Bhd (Coastal) was recently listed as one of the top five small cap stocks for 2011 in OSK Research Sdn Bhd’s (OSK Research) Top 50 Small Cap Jewels book.

According to the research firm, Coastal was in ongoing talks with several undisclosed international industry players in relation to setting up joint ventures or strategic stakes in the company.

Coastal which deals primarily in ship building and vessel chartering in the oil and gas industry was keen in venturing into new areas of the industry such as fabrication, repair and maintenance to enhance shareholder value.

Despite Coastal’s impressive share price surge of 61 per cent since January, the analyst believed there was further upside to the stock as the current price was still attractive at a price earnings ratio (PER) of five to six times compared with the oils and gas sector‘s PER of 12 times to 14 times.

In addition, if the company was able to move up the value chain and venture into the fabrication business, investors should be comparing Coastal with its listed peers Kencana Petroleum Bhd and MMHE Sdn Bhd, both of which were trading at a PER of 21 to 27 times, noted OSK Research.

Although Coastal would be the ‘new kid on the block’, OSK Research believed that valuing the company at a PER of eight times was fair, as this comprised only about 30 per cent of its two bigger peers’ valuation and yet provided a 40 per cent upside from the current share price.

Now that Coastal had gained visibility among investors, its share price should trade higher than the current five to six times PER valuation.

The company was believed to have the makings of a merger and acquisition target because the focus was shifted on a potential new business to be injected into the company rather than on its core shipbuilding business.

Based on a PER of eight times for the financial year 2011 earnings per share, the target price for the company was pegged at RM4.85 per share, a boost from the last traded price of RM3.47 per share.

 http://www.theborneopost.com/?p=117349

Gold hits record high

Gold hits record high after Trichet rates comments

April 07, 2011

File photo of a 1kg gold bar on display in a shop in Dubai’s gold souk. Gold prices hit fresh record highs in London and New York today, April 7, 2011. — Reuters pic

LONDON, April 7 — Gold hit a fresh record high near US$1,465 (RM4,395) an ounce today after European Central Bank president Jean-Claude Trichet indicated the rate hike announced by the bank earlier may not be the first in a series.

Spot gold hit a record US$1,464.80 an ounce and was bid at US$1,460.50 at 1420 GMT, against US$1,457 late in New York yesterday. US gold futures for June delivery were up US$3.80 an ounce to US$1,462.30, having peaked at US$1,467.
The ECB lifted interest rates by 25 basis points today as expected, but Trichet said in a press conference after the move that the bank had not taken the decision as the first in a string of such moves.
“The market had factored in that Trichet would be a bit more hawkish in his comments,” said Peter Fertig, a consultant at Quantitative Commodity Research. “If you look at government bond markets, they all recovered during his press conference.”
“Of course they will be vigilant in monitoring inflation developments very closely. But it is more inflation expectations that made the ECB concerned, and less the actual increase (in inflation).”
Gold tends to suffer in a rising interest rate environment, as this raises the opportunity cost of holding non-interest bearing bullion. Expectations for a rise in euro zone rates kept a lid on gold’s rally to record highs earlier this year.
That came largely on the back of unrest simmering across the Middle East and North Africa, which has lifted risk aversion, and boosted oil prices to multi-year highs.
A Nato air strike killed at least five rebels near the Libyan port of Brega, medics said, and insurgents reported Muammar Gaddafi’s forces killed five more in a bombardment of besieged Misrata.
“The tail risk event remains uncertainty in the Middle East leading to a supply side-driven spike in the oil price,” said Citigroup in a note.
“Historically the biggest beneficiary under an oil price spike environment has been gold, with large amounts of petro dollars being recycled into the yellow metal.”
Holdings of the world’s largest gold-backed exchange-traded fund, New York’s SPDR Gold Trust, slipped more than 7 tonnes yesterday to their lowest since May 2010, their biggest one-day drop in more than two weeks.
Interest in ETFs, which issue securities backed by physical metal, has been muted since the start of the year, with the SPDR recording its biggest ever quarterly outflow in the first three months of 2011.
“Other factors have to be used to explain the rally of gold prices, and there are plenty of them; besides the weak US dollar, the debt crisis in the euro zone peripherals is also clearly playing a role,” said Commerzbank in a note.
“Portugal bowed to pressure yesterday evening and not unexpectedly requested financial aid from the EU rescue fund. The country is set to receive around 80 billion euros as soon as possible.”
Meanwhile, banks led European shares to their highest level in nearly a month as strategists said interest rate rises would not derail equities’ advance and a bailout for Portugal would give stability.
Among other precious metals, silver was bid at US$39.48 an ounce against US$39.43, just off the previous session’s 31-year high at US$39.75. Platinum was at US$1,784.24 an ounce versus US$1,787.45, while palladium was at US$780.97 versus US$778.10. — Reuters

POS Malaysia generates strong Free Cash Flow.

Have taken a brief look at POS.

1.  Cash rich company.  Cash RM 398.033 m, little debt.

2.  Net CFO is strong .. RM 198.451m

3.  Its FCF is strong … net CFO 198.451 – capex 64.898 = RM 133.553m

4.  Market cap = RM 1670.2 m @ share price of RM 3.11 each.

5.  FCF/Market cap = 8% (very good).

6.  Dividend paid 50.346 m  DY = 50.346/1670.2 = 3%


It is no wonder that so many suitors are lining to acquire this stock from Khazanah.

Latest valuation based on closing price of 7.4.2011

Outstanding shares of POS = 537.03 million.
At the closing price of  MR 3.74 per share on 7.4.2011, its market cap = MR 2,008.5 million.
The FCF generated by POS in the last FY was MR 133.553 million.
Its FCF/Market Cap on 7.4.2011 = 6.65%.
Its Market Cap/FCF = 15 x
The successful company that acquire POS would have bought a company that is generating good net CFO and strong FCF.  
It is on the basis of this FCF that makes the valuation of POS seems reasonable for the moment.

‘Itu bukan Anwar’, kata Wan Azizah

‘Itu bukan Anwar’, kata Wan Azizah
NONEIsteri Anwar yang juga presiden PKR, Datuk Seri Dr Wan Azizah Wan Ismail kata video itu merupakan “bukti paling jelas” bahawa suaminya bukanlah lelaki yang mengadakan hubungan seks dengan seorang pelacur itu.

Membaca satu kenyataan hari ini, wan Azizah berkata, keluarganya telah memutuskan untuk menonton video 
yang disiarkan di Internet itu dan mendapati jelas bahawa susuk badan lelaki berkenaan terlalu berbeza dengan susuk badan Anwar.

Penny Stocks: Pump and Dump (SELL TO SUCKERS)

Penny stocks are those that trade at < RM 1.00.
Some investors confuse these low prices for value.
These stocks are often and easily promoted or manipulated.
Beware of the promoters or manipulators who hype these stocks in the internet forums.
They have often taken a position well before.
The unwary “investors” enter and soon find themselves buying these stocks higher than they can sell.
Here is an example of a stock that was from a forum.
Study the chart of the stock and the table of its prices and volumes.
I believe this chart depicts this penny stocks when it was being “Pumped and Dumped” by its promoters or manipulators. (Period of interest:  September 2010 to December 2010)
There are good lessons one can draw from this event.
Check the observations made below.


LCTH :  Daily Prices and Volumes

Prices (Daily)
Date Open High Low Close Volume Adj Close*
Jan 19, 2011 0.28 0.28 0.28 0.28 437,800 0.28
Jan 18, 2011 0.29 0.29 0.28 0.28 435,000 0.28
Jan 17, 2011 0.28 0.29 0.28 0.28 469,400 0.28
Jan 14, 2011 0.29 0.29 0.28 0.29 479,000 0.29
Jan 13, 2011 0.29 0.29 0.28 0.29 993,400 0.29
Jan 12, 2011 0.29 0.29 0.28 0.29 744,000 0.29
Jan 11, 2011 0.29 0.29 0.28 0.29 409,000 0.29
Jan 10, 2011 0.29 0.30 0.28 0.30 833,600 0.30
Jan 7, 2011 0.30 0.30 0.28 0.29 678,300 0.29
Jan 6, 2011 0.28 0.30 0.28 0.30 1,728,800 0.30
Jan 5, 2011 0.27 0.28 0.27 0.28 583,600 0.28
Jan 4, 2011 0.26 0.28 0.26 0.28 487,300 0.28
Jan 3, 2011 0.26 0.26 0.25 0.26 492,100 0.26
Dec 30, 2010 0.26 0.26 0.25 0.26 217,000 0.26
Dec 29, 2010 0.26 0.26 0.25 0.26 93,000 0.26
Dec 28, 2010 0.27 0.27 0.26 0.26 86,000 0.26
Dec 27, 2010 0.25 0.28 0.25 0.27 1,468,000 0.27
Dec 24, 2010 0.25 0.25 0.25 0.25 166,200 0.25
Dec 23, 2010 0.25 0.26 0.25 0.26 203,800 0.26
Dec 22, 2010 0.25 0.26 0.25 0.26 648,700 0.26
Dec 21, 2010 0.25 0.26 0.25 0.25 822,000 0.25
Dec 20, 2010 0.26 0.26 0.25 0.25 598,400 0.25
Dec 17, 2010 0.26 0.26 0.26 0.26 400,600 0.26
Dec 16, 2010 0.26 0.26 0.26 0.26 57,400 0.26
Dec 15, 2010 0.26 0.27 0.26 0.27 169,600 0.27
Dec 14, 2010 0.26 0.26 0.26 0.26 456,400 0.26
Dec 13, 2010 0.26 0.26 0.25 0.26 649,500 0.26
Dec 10, 2010 0.26 0.26 0.25 0.25 732,200 0.25
Dec 9, 2010 0.26 0.26 0.25 0.26 303,900 0.26
Dec 8, 2010 0.26 0.26 0.25 0.26 304,600 0.26
Dec 6, 2010 0.26 0.27 0.25 0.26 625,500 0.26
Dec 3, 2010 0.27 0.27 0.26 0.26 628,600 0.26
Dec 2, 2010 0.27 0.28 0.27 0.27 283,400 0.27
Dec 1, 2010 0.26 0.27 0.26 0.26 93,500 0.26
Nov 30, 2010 0.28 0.28 0.26 0.27 875,200 0.27
Nov 29, 2010 0.28 0.28 0.27 0.28 579,100 0.28
Nov 26, 2010 0.28 0.28 0.28 0.28 378,800 0.28
Nov 25, 2010 0.28 0.28 0.28 0.28 720,800 0.28
Nov 24, 2010 0.28 0.28 0.28 0.28 305,900 0.28
Nov 23, 2010 0.29 0.29 0.27 0.28 928,300 0.28
Nov 22, 2010 0.29 0.29 0.28 0.28 1,057,800 0.28
Nov 19, 2010 0.29 0.29 0.29 0.29 504,200 0.29
Nov 18, 2010 0.29 0.30 0.29 0.29 552,100 0.29
Nov 16, 2010 0.31 0.31 0.30 0.31 811,000 0.31
Nov 15, 2010 0.34 0.34 0.29 0.31 3,137,500 0.31
Nov 12, 2010 0.38 0.40 0.37 0.37 2,716,800 0.37
Nov 11, 2010 0.37 0.38 0.35 0.38 3,223,300 0.38
Nov 10, 2010 0.38 0.38 0.36 0.37 789,500 0.37
Nov 9, 2010 0.40 0.40 0.36 0.38 1,299,100 0.38
Nov 8, 2010 0.39 0.40 0.38 0.38 4,302,600 0.38
Nov 4, 2010 0.32 0.41 0.32 0.38 11,517,500 0.38
Nov 3, 2010 0.31 0.32 0.31 0.32 466,000 0.32
Nov 2, 2010 0.32 0.32 0.31 0.31 419,000 0.31
Nov 1, 2010 0.32 0.33 0.32 0.33 1,067,600 0.33
Oct 29, 2010 0.30 0.32 0.30 0.31 1,036,800 0.31
Oct 28, 2010 0.30 0.31 0.29 0.31 127,000 0.31
Oct 27, 2010 0.29 0.31 0.29 0.31 572,600 0.31
Oct 26, 2010 0.28 0.29 0.28 0.29 309,000 0.29
Oct 25, 2010 0.28 0.28 0.28 0.28 204,300 0.28
Oct 22, 2010 0.28 0.28 0.28 0.28 130,000 0.28
Oct 21, 2010 0.28 0.28 0.27 0.28 156,100 0.28
Oct 20, 2010 0.27 0.28 0.27 0.28 254,000 0.28
Oct 19, 2010 0.28 0.28 0.28 0.28 40,000 0.28
Oct 18, 2010 0.28 0.28 0.28 0.28 12,000 0.28
Oct 15, 2010 0.27 0.28 0.27 0.27 0 0.27
Oct 14, 2010 0.28 0.28 0.28 0.28 70,000 0.28
Observations:
After a long period of promotion, many investors were made aware of the stock in the internet forum.  
Subconsciously, the stock entered their attention and was in their radar screen.  
Many hesitated and did not enter in the early stages of the promotion due to doubts and cautiousness.
Then, when the volume started to climb and the prices started to move upwards, these previously primed “investors” took notice.  
The more adventurous entered first and early at this stage.
As the price rose, more entered.  This was the confirmation that many of these “primed investors” were waiting and looking for.  “It must be true, the game is now on, I am getting in too.”  
But note, they were buying at higher prices.  Some even bought more at higher prices (averaging up).   Did you notice that they were already paying a higher price than the “usual”?
Then more of the “dumb money” flowed in.  Look at the huge volume of stocks transacted on 4.11.2010.  This counter was the talk of the market now.  Ever wondered WHO SOLD on that day?  Of course, the manipulators and the smart money.
The party was as good as over by now.  However, more SUCKERS came in over the next few trading days.  With ALL SUCKERS in the stock now, and the smart money having moved out, there were no more SUCKERS to support the price.  
ALL the SUCKERS now holding the stocks were hoping to sell to ANOTHER SUCKER who was willing to buy from them at higher prices.  
Alas, NO new SUCKERS appeared.  This led to the precipitous fall in the price from the 6th trading day after the peak of the volumes and the price of the stock.
It was then a matter of awakening for those left holding the stock at high prices.  Over the subsequent weeks and months, they too realised they were SUCKED, holding or departing from the shares with their losses.
Prices (Daily)
Date Open High Low Close Volume Adj Close*
Oct 13, 2010 0.28 0.28 0.28 0.28 80,600 0.28
Oct 12, 2010 0.28 0.28 0.28 0.28 135,000 0.28
Oct 11, 2010 0.28 0.28 0.28 0.28 120,000 0.28
Oct 8, 2010 0.28 0.28 0.28 0.28 0 0.28
Oct 7, 2010 0.28 0.28 0.28 0.28 20,600 0.28
Oct 6, 2010 0.28 0.28 0.28 0.28 42,000 0.28
Oct 5, 2010 0.28 0.28 0.28 0.28 13,000 0.28
Oct 4, 2010 0.28 0.28 0.27 0.27 220,000 0.27
Oct 1, 2010 0.27 0.28 0.27 0.28 91,900 0.28
Sep 30, 2010 0.27 0.27 0.27 0.27 72,600 0.27
Sep 29, 2010 0.28 0.28 0.27 0.27 28,400 0.27
Sep 28, 2010 0.28 0.28 0.28 0.28 190,000 0.28
Sep 27, 2010 0.28 0.28 0.28 0.28 3,000 0.28
Sep 24, 2010 0.27 0.27 0.27 0.27 1,800 0.27
Sep 23, 2010 0.28 0.28 0.28 0.28 60,000 0.28
Sep 22, 2010 0.28 0.28 0.28 0.28 172,000 0.28
Sep 21, 2010 0.28 0.28 0.28 0.28 5,000 0.28
Sep 20, 2010 0.28 0.28 0.28 0.28 0 0.28
Sep 17, 2010 0.28 0.28 0.28 0.28 6,000 0.28
Sep 15, 2010 0.28 0.28 0.28 0.28 10,000 0.28
Sep 14, 2010 0.28 0.28 0.26 0.26 71,600 0.26
Sep 13, 2010 0.27 0.28 0.27 0.27 0 0.27
Sep 9, 2010 0.28 0.28 0.28 0.28 10,000 0.28
Sep 8, 2010 0.27 0.27 0.27 0.27 10,600 0.27
Sep 7, 2010 0.28 0.28 0.27 0.27 36,000 0.27
Sep 6, 2010 0.27 0.29 0.27 0.27 0 0.27
Sep 3, 2010 0.28 0.28 0.28 0.28 25,600 0.28
Sep 2, 2010 0.27 0.28 0.26 0.28 76,200 0.28
Sep 1, 2010 0.28 0.28 0.28 0.28 0 0.28
Aug 30, 2010 0.28 0.28 0.28 0.28 43,000 0.28
Aug 27, 2010 0.28 0.28 0.28 0.28 20,000 0.28
Aug 26, 2010 0.28 0.28 0.28 0.28 70,000 0.28
Aug 25, 2010 0.28 0.28 0.28 0.28 186,000 0.28
Aug 24, 2010 0.29 0.29 0.28 0.28 40,000 0.28
Aug 23, 2010 0.28 0.28 0.28 0.28 20,600 0.28
Aug 20, 2010 0.28 0.28 0.28 0.28 200,000 0.28
Aug 19, 2010 0.29 0.29 0.29 0.29 0 0.29
Aug 18, 2010 0.29 0.29 0.28 0.29 163,700 0.29
Aug 17, 2010 0.28 0.29 0.28 0.29 241,500 0.29
Aug 16, 2010 0.28 0.29 0.28 0.28 341,800 0.28
Aug 13, 2010 0.28 0.29 0.28 0.29 214,000 0.29
Aug 12, 2010 0.29 0.29 0.29 0.29 0 0.29
Aug 11, 2010 0.29 0.29 0.29 0.29 0 0.29
Aug 10, 2010 0.29 0.29 0.29 0.29 37,500 0.29
Aug 9, 2010 0.31 0.31 0.29 0.29 19,000 0.29
Aug 6, 2010 0.29 0.31 0.29 0.29 0 0.29
Prices (Daily)
Date Open High Low Close Volume Adj Close*
Aug 3, 2010 0.30 0.30 0.30 0.30 30,000 0.30
Aug 2, 2010 0.28 0.30 0.28 0.30 18,600 0.30
Jul 30, 2010 0.30 0.30 0.29 0.30 202,000 0.30
Jul 29, 2010 0.31 0.31 0.30 0.30 238,800 0.30
Jul 28, 2010 0.29 0.30 0.29 0.29 53,000 0.29
Jul 27, 2010 0.29 0.29 0.29 0.29 95,000 0.29
Jul 26, 2010 0.29 0.29 0.29 0.29 94,900 0.29
Jul 23, 2010 0.30 0.31 0.29 0.29 306,000 0.29
Jul 22, 2010 0.30 0.31 0.29 0.29 40,500 0.29
Jul 21, 2010 0.29 0.31 0.29 0.30 273,600 0.30
Jul 20, 2010 0.29 0.31 0.29 0.29 185,200 0.29
Jul 19, 2010 0.30 0.30 0.29 0.30 18,000 0.30
Jul 16, 2010 0.29 0.31 0.29 0.29 0 0.29
Jul 15, 2010 0.31 0.31 0.29 0.31 159,600 0.31
Jul 14, 2010 0.29 0.31 0.29 0.31 15,000 0.31
Jul 13, 2010 0.28 0.29 0.28 0.29 1,800 0.29
Jul 12, 2010 0.29 0.29 0.28 0.28 28,900 0.28
Jul 9, 2010 0.29 0.30 0.29 0.30 50,000 0.30
Jul 8, 2010 0.29 0.29 0.29 0.29 25,000 0.29
Jul 7, 2010 0.29 0.30 0.29 0.29 37,000 0.29
Jul 6, 2010 0.28 0.28 0.28 0.28 10,000 0.28
Jul 5, 2010 0.28 0.30 0.28 0.28 0 0.28
Jul 2, 2010 0.29 0.29 0.29 0.29 20,000 0.29
Jul 1, 2010 0.29 0.29 0.29 0.29 10,000 0.29
Jun 30, 2010 0.29 0.29 0.29 0.29 26,000 0.29
Jun 29, 2010 0.29 0.29 0.28 0.28 100,500 0.28
Jun 28, 2010 0.31 0.31 0.29 0.30 75,000 0.30
Jun 25, 2010 0.29 0.31 0.29 0.29 0 0.29
Jun 24, 2010 0.30 0.30 0.30 0.30 10,000 0.30
Jun 23, 2010 0.30 0.32 0.30 0.31 680,700 0.31
Jun 22, 2010 0.29 0.30 0.29 0.29 0 0.29
Jun 21, 2010 0.29 0.30 0.29 0.29 121,200 0.29
Jun 18, 2010 0.29 0.29 0.29 0.29 20,000 0.29
Jun 17, 2010 0.30 0.30 0.30 0.30 1,000 0.30
Jun 16, 2010 0.29 0.29 0.29 0.29 85,000 0.29
Jun 15, 2010 0.28 0.29 0.28 0.29 20,000 0.29
Jun 14, 2010 0.28 0.30 0.28 0.28 0 0.28
Jun 11, 2010 0.28 0.30 0.28 0.28 0 0.28
Jun 10, 2010 0.29 0.29 0.29 0.29 40,000 0.29
Jun 9, 2010 0.29 0.30 0.29 0.30 46,000 0.30
Jun 8, 2010 0.28 0.28 0.28 0.28 22,700 0.28
Jun 7, 2010 0.28 0.28 0.28 0.28 7,000 0.28
Jun 4, 2010 0.28 0.28 0.28 0.28 600 0.28
Jun 3, 2010 0.28 0.31 0.28 0.29 89,800 0.29
Jun 2, 2010 0.28 0.29 0.28 0.28 0 0.28
Jun 1, 2010 0.29 0.29 0.28 0.29 282,600 0.29
May 31, 2010 0.29 0.29 0.29 0.29 12,000 0.29
May 27, 2010 0.28 0.29 0.28 0.29 216,200 0.29
May 26, 2010 0.28 0.28 0.28 0.28 168,000 0.28
May 25, 2010 0.29 0.29 0.27 0.28 378,800 0.28
May 24, 2010 0.29 0.29 0.28 0.29 85,000 0.29
May 21, 2010 0.28 0.29 0.27 0.29 162,500 0.29
May 20, 2010 0.29 0.29 0.28 0.29 121,800 0.29
May 19, 2010 0.30 0.30 0.30 0.30 305,000 0.30
May 18, 2010 0.31 0.31 0.30 0.30 173,000 0.30
May 17, 2010 0.31 0.31 0.31 0.31 44,600 0.31
May 14, 2010 0.31 0.31 0.31 0.31 77,000 0.31
May 13, 2010 0.32 0.34 0.30 0.31 730,100 0.31
May 12, 2010 0.31 0.32 0.31 0.31 866,700 0.31
May 11, 2010 0.33 0.33 0.33 0.33 30,000 0.33
May 10, 2010 0.33 0.33 0.32 0.33 144,700 0.33
May 7, 2010 0.32 0.34 0.32 0.32 253,600 0.32
May 6, 2010 0.34 0.34 0.33 0.34 272,300 0.34
May 5, 2010 0.34 0.34 0.34 0.34 15,000 0.34
May 5, 2010 0.0178 Dividend
May 4, 2010 0.36 0.36 0.35 0.36 206,100 0.34
May 3, 2010 0.36 0.36 0.36 0.36 30,000 0.34
Check also:
Penny  Stocks:  Pump and Dump
GSB: “Hidden Gem” or “Pump and Dump Penny Stock”

Buffett Abandons Value Investing. Penny Stocks, Day Trading Are My Real Key To Wealth

Buffett: Penny Stocks, Day Trading Are My Real Key To Wealth

 Posted: April 1, 2011 11:05AM by Stephen Simpson


In an interview that is sure to shake the pillars of Wall Street, billionaire investor Warren Buffett revealed to our crack reporter Kent Baleevit that he actually made his wealth from risky penny stocks and day trading. “C’mon, Kent … long term value investing? Who has time for that crap? I’m an old man … I need to make my money quick and get to the casino before the lines at the early-bird buffet get too long.”

Turning His Back on Value
Although Warren Buffett is one of the investors widely credited with popularizing long-term value investing, in point of fact he has long since abandoned that approach. “Here’s the thing, Kent … I just got tired of waiting. Do you know how long it takes to make money from holding undervalued stocks?”
Apparently academic research played a significant role in Buffett’s change of heart. Many academics have written papers that demonstrate that there is no system that can reliably beat the market, and that market-beating investors are just a statistical anomaly. This view has perhaps been best expressed in Burton Malkiel’s book “A Random Walk Down Wall Street”.
“See, Kent? I read these papers and these books and they made a really impressive case that it was just impossible to consistently beat the markets. They had a lot of stats and cool charts and everything. So, I looked at the billions and billions of dollars that I had, and the hundreds of thousands of dollar that they had, and decided that they must know something I didn’t. So, I decided to abandon long-term value investing”.
When asked if he had any plans to continue investing, the famous Omaha investor was practically ebullient. “Day trading, baby! It’s exciting and these sites make it so easy. I mean, I just log on to read the news and there’s a “Trade” button everywhere I look. And when I trade, it makes this cool sound … like the machine is happy. And if I trade a thousand times this month? I’ll get to be in their Super-Duper Special Trader Club, and that will give me access to these software packages that I could just go out and buy for $100″.

Making Dollars Out Of Pennies
Instead of buying giant boring companies and holding for decades, Buffett has thrown his lot in with the penny stocks. After all, those efficient market hypothesizers that proved that it’s impossible to beat the market have based their case largely on information – the idea being that all that can be known about a big company is already known, but that it might be possible for lesser-known companies to have some outperformance potential. Not only that – at just pennies a share an investor can own hundreds of thousands of shares at a time.
On top of that, Buffett has discovered that there are some truly amazing opportunities in penny stocks. “Yeah, this one company? They’re going to cure cancer. I called the CEO and he told me so himself. I did some research afterwards on Google and I didn’t see any articles about it in Science or Nature, but the CEO assured me that those journals are just fronts for the hedge fund industry and his company had to keep all of the really interesting information to themselves or the pharmaco-industrial-media-complex would steal it all.”
“Oh, and this other company? They know how to change your car’s engine to run on water. And there’s one here that can clean up pollution. And then there are these China companies. I don’t really know what they do, but they’re Chinese, so that has to work right? I mean, I know they don’t have any auditors and they’re actually headquartered in the Caymans, but I’m sure it’s all fine. I mean, it’s China!”

Day Trading – The Real Secret to Wealth?
Buffett has also apparently turned to day trading to supplement his income. Apparently, dozens of helpful millionaires log on to message boards every day just to help investors like him make more money. “Yeah, Kent, it’s really cool. I read about all this money that people were making, and these systems that could double or triple my money in just a couple of weeks. So, I had to check it out, right?”
“Once I got to doing research online, it really just changed my life. There were all these guys talking about how they doubled their money in just a week and all I had to do was follow their picks and I could do the same. How awesome is that? I mean, I know there are all those newsletters out there that promise to double my money, but they charge money. And hey, I’m Warren-freaking-Buffett. I don’t spend money if I don’t have to, right? And besides, it’s the internet … it must be true, right? I mean, I’m a billionaire and I never give any of my ideas away a minute sooner than I have to, but there’s all of these rich people online just waiting to help you!”.

On The Markets and Corporate Strategy
Buffett was not just going to talk about his new investment strategies. He also wanted to offer a few thoughts on the markets themselves and corporate policies. “Here’s the thing … I know the market is rigged, but that’s actually a good thing. I mean, I’ve never once lost money because I made any kind of mistake – it was just a conspiracy by shorts and journalists to bring down the stocks and hurt innocent investors like me. Once we stop them from exposing the problems these companies have and raising any kind of doubts whatsoever, all of those stocks will go right back up”.
Turning to acquisitions, Buffett questioned why all of these companies are so active in mergers and acquisitions. “I don’t see why these companies keep buying and selling these units. I mean, they’re just enriching the bankers and amusing themselves, right?”
“I know I used to do deals, but I’ve sworn off of them now”. When asked why he would stop such a successful strategy, he answered, “well, it’s those academics again. I read some papers that said that deals don’t add value and the markets are always efficient … so any sort of deal done at any premium has to be a bad move. Who was I going to believe? My own track record of value-building deals or a paper written by an academic who never had to meet a payroll in his life?”

The Bottom Line
To say the least, Buffett’s newfound market wisdom is intriguing. After years of building incredible wealth with a very well-described and consistent strategy, Buffett has decided to believe those who lack the patience or ability to replicate the strategy and assert that it therefore cannot work. Likewise, this famous investor’s embrace of modern investment strategies like day trading and penny stocks is sure to force a reevaluation of these neglected sectors.
Happy April Fool’s Day from Financial Edge! This article was written for fun, and was not intended to offend or misinform.