Olam Stock Take on Blog

Recently, i done a Facebook Q&A to see what are the companies my readers are interested in. And Olam comes out as quite a hot favourite.

I shall touch on Olam now (sorry for the delay! Busy with some stuff recently...)

Fundamental:

Everyone should have known about the big impact of the Block's damaging report from Muddy Waters which led to a stock fall of nearly 20%, adding to the woes of a bad commodity cycle.

As for the recovery, Olam is issuing a big sum, US$750m, of 5 year Bonds which comes with "free" warrants.. trying to boost its war-chest. The cost of this debt is a whooping 13.7% according to the article by Michael Dee, saying that it sorts of instills the notion that what Brook was correct in saying that Olam is cash-poor and debt-intensive. 

If you wish to read the entire report, Like my Facebook Page and message me and i can send it to you :)

In the meanwhile, Olam is still continuing to acquire businesses using the expensive debt. It's like borrowing money at 13% annually and using the money to buy businesses. You have to get more than 13% return from the acquisitions to be yield-accretive - not really my cup of tea.

Technical

After hitting rock-bottom, Olam seems to be on a channel uptrend [see the 2 lines moving up]. On the longer term over a year period, the market seems to be in a descending triangle formation.

Thus, short-term traders can choose to take profit at $1.90 and set a stop-loss at the $1.50 mark established in June.

Conclusion:

I agree that confidence is boosted by the support of Temasek Holdings, which upped its stakes to 18% as one of the major shareholders. However, this bad news is not one which is temporary, it divulges real significant balance sheet problems for Olam - causing equity dilution in the future due to the issue of free warrants.

Furthermore, I have read reports on how 27% of net income comes from inflated biological gains. Therefore, personally, I would regard Olam as a short-term play. For longer-term wise, its better to go for Noble group or Wilmar which are more stable.

Another Gold Profit Opportunity?

Here's How to Profit Off Last Month's Fed Minutes

Gold got smacked hard last Thursday. The precious metal dropped $22 an ounce right after the Federal Open Market Committee (FOMC) released its minutes for last month's meeting. It fell another $25 in overnight trading. It seems a few members of the Fed thought that if everything worked out, they might be able to ease off the quantitative easing (QE) gas pedal sometime later this year. Now that's funny… I guess some people can't take a joke. Instead of laughing, some people sold their gold… They're thinking that if the Fed is serious about stopping all the QE, there will be less inflationary pressure and fewer reasons to own gold. But here's the thing… Fed members talking about cutting back on QE is like senators and congresspersons talking about cutting the deficit. It's not going to happen. They can talk about it. And all that debate makes for fun political theater. But once a country starts down the road of debt monetization, it doesn't turn back… ever. Sure, the Fed can set targets – like 6.5% unemployment, 2% inflation, or some acceptable rate of economic growth – for when it's time to ease off the QE accelerator. But it's just a show to convince the masses that the Fed knows what it's doing and is in control of the situation. Just like the show Congress puts on whenever the issue of "spending cuts" is put on the table. Yet, the national debt time-bomb just keeps ticking away. And the QE pedal will remain pressed to the floor. Lol.. i love this part: Congress is going to continue spending money it doesn't have… The Treasury is going to continue issuing bonds to borrow the money to pay for the deficit spending… The Fed is going to continue printing money to buy the bonds the Treasury issues to keep interest rates low… And all that new money is going to continue pushing down the value of the dollar and pushing up the price of gold. Now, consider that the central banks of Europe and Japan are doing the exact same thing, and ask yourself if it makes more sense to sell gold or to buy it. Take a look at the following chart…   At just over $1,650 per ounce, gold is resting right on its longer-term support line going all the way back to January 2011. There's additional support just below at $1,620, followed by even more support at $1,550. Last week's drop in the gold price looks like a good buying opportunity for the metal – especially if you missed the chance to buy it the last time it was down at this level. Best regards and HUAT AH! James - K.I.S.S. Investor Keep Investing Sweet and Simple :D

Buying Opportunity for GOLD Optimists

It's a well-written article comparing Gold Stocks (Index) to the price of Gold. Can take a look.. Another "Once in a Decade Buying Opportunity"

It was another tough year for gold-stock investors. With stocks up 12% and gold up 5% last year, you might think gold stocks enjoyed a solid year in the plus column, too… But you'd be wrong. Gold stocks, as measured by the AMEX Gold Bugs Index (the HUI), were down 15% in 2012. That poor performance follows on the heels of a 10% loss in 2011. So after two years of dismal returns, investors are once again tossing out the bargain-priced gold miners and giving the rest of us another "once in a decade" buying opportunity… It's not supposed to happen this way. Obviously "once in a decade" opportunities are only supposed to come along, well, once every 10 years or so. But we already had one of these moments in gold stocks last year. Last May, gold stocks were trading at their cheapest value relative to gold as they had been at any other time in the past decade – except for the October 2008 financial crisis. Anyone who took advantage of the setup I noted at the time could have made up to 40% in just four months. The same condition exists today. Take a look at this chart comparing the HUI to the price of gold… The chart is nearly back down to where it was last May. Mining stocks are dirt-cheap again. Yes, they can get cheaper from here. But the reward far outweighs the risk at this point. After all, many of the big names in the mining sector are trading at single-digit price-to-earnings ratios and are paying dividends of more than 2.5%. (Compare that to the S&P 500, which trades at 14 times earnings and yields just 1.8%.) Foolish investors are making a mistake by selling their gold stocks here. Now is the time to buy. If the sector performs as it did following last year's "once in a decade" buying opportunity, mining stocks could be sharply higher just a few months from now.

January Effect Stock Market

The first working day of the New Year 2013 and the stock markets are all roaring ahead!

Some may say its brought by the Fiscal cliff relief, and that the world economies are all in better shape than ever...

I am no economist but i have predicted correctly that markets are moving up during year 2012 in my previous blog posts

• March - http://kissinvesting.blogspot.sg/2012/03/euro-worries-wanes-beginning-of-global.html
• June - http://kissinvesting.blogspot.sg/2012/06/outcome-of-greece-election.html

Right now, I believe part of the acceleration may also be due to the January Effect too...

Check it out at these 2 websites:

1) http://en.wikipedia.org/wiki/January_effect

2) http://www.investopedia.com/terms/j/januaryeffect.asp#axzz2Gpd2sHqD

This phenomenon results from 2 factors where 

• Fund managers like to sell off the stocks to offset or to show a good record for the year during Dec while they go on long leave. The huge capital are then plowed into the markets during January. 
• Common folks getting bonus tends to re-invest the proceeds to stock markets - pushing up prices.

If you are talking about the big picture (see below), i will consider it as "Relief" - around the middle of the big stock market cycle.

Thus, value investors should take this time and pick out the remaining undervalued companies and ride the wave all the way up now! 

Either way, Investors are in for a treat $$$ here. :D

Hope you like my post and can do me a favour by "Like"-ing my facebook page at www.facebook.com/kissinvesting. Thanks & HUAT AH!