Posts tagged ‘CLP Holdings 中電控股 (00002.HK)’

Master ChefI have recently watched the exciting US series of MasterChef, where a bunch of untrained home cooks had to compete in various cooking challenges to compete for a prize of USD 250,000.  The obvious part is to watch fantastic cooking demonstrated before your eyes, and how each contestant fights for the next spot in the challenge.  The best meat of each episode of course, is seeing the judges, Mr. Gordon Ramsay, Mr. Joe Bastianich, and Mr. Graham Elliot yell at the contestants when they mess up their dishes.  These are some of the best chefs in the world, and they have earned their right to have exceptionally high standards in terms of cooking skills required.

After all, everyone in the series is competing to be America’s MasterChef.  They should be able to take some heat from the judges. 🙂

But what this makes me think is that, actually, cooking and investing have a lot in common.  What I would like to drive at, is that our cooking / eating habits, should be more in line with how we invest.

When I look to put food in my mouth, I would never think for a second to put food that is uncooked (great sashimi an exception), or meat that wasn’t handled properly.  There are arguably many many stocks which are a bit like a rotten piece of chicken (likely with flies hovering all around).  You wouldn’t think of putting that in front of a plate, right?

From the MasterChef episodes, I see that the contestants got to work with the juiciest cuts of steak and amazing varieties of seafood.  The lobsters and scallops are always so attractive and amazing!

Makes me think that whenever the contestants work with the best materials to cook with, they can’t really go wrong!  Even if you were a really bad cook, you could come up with an OK dish!

If I had to pick 5 stocks which I think are of good quality and they are in consecutive numbers, 0001.HK to 0005.HK would do! 🙂  Although 0005.HK seems to be on track from less write offs and a strong Asia presence, I do worry whether the company has grown too big, and how a company of its size can prevent taking excessive risk again like they did during the Subprime crisis.

I mean, they took so much risk that they had to do a rights offering at close to 33 HKD per share just to be in line with capital requirements!  Then again, those who believed in the franchise and held onto the shares from the rights did quite well!

Like my mom used to tell me all the time, “don’t put all that junk food in your mouth”!

Land mines are for people who haven’t done their homework to step on, not for you to eat!

 

– Mr. Alpha

 

Olympus Has FallenA lot of fear in the markets with the recent news on possible outbreak of Avian Flu and intense situation in North Korea.  Mind you, the recent movie “Olympus Has Fallen” describes a possible scenario which North Korea may pursue.  Of course, the movie has a lot of areas that is quite unreasonable, but for an action packed movie, it does its job!

With all this fear in the markets after seeing the drop of 600+ points in the HSI last Friday, it maybe time for some low beta stocks!

Even with the stock picking skills, it is much much harder to outperform during down trending markets.  You can sow the seeds of future success, but you need to be patient.  Perhaps when markets turn upwards, it may be time for high beta stocks then!

Stock Last C. Price Adjusted Beta
HK2 66.95 0.38
HK3 22.4 0.66
HK6 73.35 0.37

If you have formed an idea of a price you would like to buy for example, setting a limit order is often wise but requires much much more patience.

Picture from the below link:

http://inthemouthofdorkness.blogspot.hk/2013/01/im-best-hope-youve-got-olympus-has.html

– Mr. Alpha

During times of high market volatility, investors may typically ask, “what kind of strategy should I follow?” or “which stocks should I be buying and selling”?  Using the concept of statistical regression between individual stock and market returns, we can begin thinking about these questions using the concept of “Beta” from the Capital Asset Pricing Model (CAPM).

Beta is a measure of the sensitivity of individual stock returns to market returns.  A stock like HK2800 (Tracker Fund) would have a beta close to 1.  A Beta significantly higher than 1 indicates that a stock may rise or fall more sharply than the market index.  A Beta significantly less than 1 indicates that the individual stock returns do not move in the same direction as how the market moves.

 

Top 5 High Beta stocks:

Stocks Beta
中國智能交通 CHINA ITS (01900.HK) 3.67
華耐控股 SINOREF HLDGS (01020.HK) 2.58
卡姆丹克太陽能 COMTEC SOLAR (00712.HK) 2.6
珠江鋼管 CHU KONG PIPE (01938.HK) 2.52
旭光高新材料 LUMENA NEWMAT (00067.HK) 2.5

 

For high Beta stocks, if an investor had a view that the market is trending upwards in the short term, buying high beta stocks may lead to higher gains.  But under the current highly volatile environment, investors may be better off simply to avoid high beta exposure, as these are the names that may drop more significantly than the market.  What is also notable is that in the high beta list, China property developers tend to show up further down the list of top 50 high beta names.

 

Top 5 Low Beta stocks:

Stocks Beta
中電控股 CLP HOLDINGS (00002.HK) 0.1
電能實業 POWER ASSETS (00006.HK) 0.12
領匯房產基金 LINK REIT (00823.HK) 0.21
長江基建集團 CKI HOLDINGS (01038.HK) 0.22
和記電訊香港 HUTCHTEL HK (00215.HK) 0.24

 

Under the current highly volatile environment, investors may be better off to have low Beta exposure as a cornerstone security to build a defensive portfolio.  As always, comments and feedback are welcome!

 

Mr. Alpha

 

Low correlation with HSI is a characteristic of a defensive utility stock. The monthly linear regression between CLP Holdings (00002.HK) stock return and HSI return is a good example.

-Mr. Alpha

中電控股 CLP Holdings (00002.HK) versus HSI monthly return regression

Statistics: Monthly Linear Regression between CLP Holdings (00002.HK) Stock Return versus HSI Return as of July 2012