ECM: A Post Mortem

In stocks, sometimes I would like to have a large 5 feet diameter target just 10 feet in front of me. I can use either a spear, bow and arrow or even throwing a knife - it will 90% hit the target. The reward for the target may not be a brand new car or even make me rich but it will nevertheless be higher than 3% to 5% annual return which we are getting from putting our monies with financial institutions.

Last September, I wrote a piece on ECM. Not that I like the business or company, but I felt that there were opportunities with this stocks. Neither was I interested in putting the call into my Felicity Fund as I am concentrating longer term on that one - it was not meant for ECM kind of trade. I however was not going to let that opportunity go (having found it) and for sure put in some of my money into the stocks.

Trading in ECM, one would know that he is to expect getting 4 things - cash, Kenanga's shares, Kenanga's RCULS and some part of ECM's shares back. If one is to invest say during the time I made my piece, the return would have been at least 10% annually. This is what I achieved...

I in fact need not put in all of those money during September but some of it was made in December when I wrote another piece. There was an average down. The return is around 4% over a period of 3 to 6 months. Annualising it, one would have made more than 12% - but not every day is a Sunday...you do not get this kind of offer every time. It is not great but it was a good opportunity.

Why such things happens? Because market is inefficient. Investors or people who get involve in the stock market are not fully knowledgeable. So am I, but probably I am better informed - that's it. Reading, learning and practice makes perfect! Many investors are more into highly tradeable stocks - those with lots of news especially hearing them from remisiers, punters etc. They are exciting but chances are one would get his pants on fire. Why take that chance? From ECM, I will not be rich from these kind of trades - but hey, Rome was not built in one day.

With the cash already in my bank account, today, I have yet to sell Kenanga, ECM and RULS will be cashed in less than a year's time. This is because as much as Kenanga and ECM are not exciting, it is still undervalued. ECM at RM0.67 is trading at below 60% of its NAV. So is Kenanga - and most probably due to the involvement of the Taib Mahmud's family in Kenanga, it is trading as such with election getting so near.

Back to trades like this, do write to me whenever there are more opportunities as such and maybe we can study this together when I have the time.

Cheers...