Friday, May 15, 2009

Pick the Right Value Stock by NextView, Benny Lee

I attended a preview in NextView on a course titled "How To Pick The Right Value Stock", speaker was Benny Lee who constantly writes for Smart Investor.

What initially attracted me was that he claimed that he can find the 'value' of a stock technically.  

As some of you may have learned that my 'valuation' imply the scientific calculation of a company's past years finance data growth rate.  It is beyond my imagination how to calculate what a stock's worth is base solely on prices alone.

At the end, it is just another marketing talk - probably a smart one thao.  When they talk about 'value', they mean the marker perceived worth, not the REAL value of a business.  So the Moving Average alone can tell us how much a stock is worth in the eye of the investors.

It may sounds logical and it is hard for me to convince otherwise.  But the real meaning of Moving Average is simply the average of a stock price base of the previous how-many-days prices.  And this Moving Average line forms the floor (support) and ceiling (resistance) price for that stock.

And in practical life, this Moving Average = Value is NOT really that exercisable.  For example;

If I think stock A is worth price X, I will buy when A's price is below X.

But in Technical Analysis, when stock A move below Moving Average (price X), its a SELL signal.  And you buy when stock A's price goes above X ( ceiling break ).  Which is OPPOSITE of valuation methods.

I immediately left the preview at this stage because I normally cannot tolerate this kind marketing twist.  However, I do have room to believe that they may have solution to my challenge but I am quite sure if the argument did get started, the best solution they can come up with is to use multiple indicators to get more reliable prediction.

Benny also claims that Most of the Analysts reports are Wrong!  And Therefore fundamental analysis is useless! He is referring to new project engagement, news of expansion, take over etc as fundamentals.  As Malpf has been preaching, anything that can change overnight is NOT fundamental!  So all these NEWs are  NOT fundamentals at all!  They are at best strong supporting news.  Which are purely subject to the Analyst's opinion on what that news may result.

For example, 100,000 viewers have promised to read Malpf blog is a good news but NOT a fundamental.  More than 500 viewers have been reading Malpf for the past 9 months - is a Fundamental.

People who promised can change, to higher or lower numbers.  But past 9 months of data already occurred and they do not get changed easily.  Fundamental is something that does NOT get changed easily.

But this is not Benny's fault at all.  Almost 100% of market analysts have no choice but to follow the trend treating news as fundamentals now.  Because everybody is talking about how good technical analysis is.  So if a market analyst is singing different tone, it is very hard for him to keep his job as his boss and others do not agree nor believe in him.

Other than above, I think they can still run a good training for beginners.  They plan to include teaching on Stochastic, MACD, Bollinger Bands and Candlesticks.  The course is only RM 150 per person and comes with 6 months support ( I think, you will have to ask NextView if you are interested ).  So its quite a good deal if you are not one of those who can learn these stuff by yourself.  

It wouldn't hurt you too much even if you got the wrong understanding on these technical stuff as long as you are able to USE them correctly.

9 comments:

Anonymous said...

http://www.youtube.com/watch?v=rhP4dDkUxrY#

It is irrelevant to your blog. Just to share with you since you have been digging hard to share with us -
Chill out!

Michael Tsen said...

thks

Anonymous said...

Hi Michael,

I'm completely new to the idea of investing and know almost nothing! Been reading some blogs where they suggest index funds. How on earth do we invest in index funds in Malaysia. pl help out a complete novice.

thanking you in advance,

flora

Michael Tsen said...

Flora, you can buy Public Index Fund or simply buy some blue chip stock, some choices at Best companies blog. Pick one that you have personal experience with and think they provide good service/business to their customers (details).

To buy an index fund, just call the company, they will assign you an agent, the agent will contact you and help you like an insurance agent :D

or you can walk into nearest Public Bank and do it yourself. If they force you to enter an agent code, you may get one from me :D

jason said...

What I can infer from this post is you disagree Benny Lee on just pure technical analysis?

You view is that both fundamental and technical are very important in value stock price,so you know when to sell or buy?

btw, what technical indicator you used in your technical analysis

Michael Tsen said...

Jason, thanks for bringing up the questions. I do realize article like this could b confusing to most.

Actually Benny is one of the best analysts I can find closest to my own investment philosophy but I was dis-liked by his claim that he can find out 'value' stocks simply by using technical analysis. Such method only finds out the 'perceived value' by the investor and not the true 'value' of a business. (actually it is also not his claim, but its a course that he is promoting claims that).

teaching people to find 'value' stocks using pure technical will further slow down the evolution investors learn about 'true value' assesment, hence I feel the need to counter such marketing method.

I use Moving Average, Stoic, RSI etc. almost like what everyone else use. But as far as technical analysis is concern, all you need to learn is this principal which is currently what Malaysia's standard is at now.

its true I think one need to look into finance data to screen out investable stocks and then use technical to further fine tune the timing for speculation purpose. details hereone of my biggest disagreement with Benny is the understanding on 'fundamental' analysis

Anonymous said...

think most of you never made big money in stockmarket before or if your ever do, I doubt you ever really take big money from the stockmarket and put in your pocket.

I mean big money is few hundred percent of return in a bull market. A bull can last as long as 6 months - 1 year in and uptrending market that can last 5 years.

I am sure if you do know technical analysis on charting, you only know it on the surface. You guys buy books to learn, learn from people like Benny Lee. Where is your competitive advantage?

People who are successful in stockmarket have competitive advantage. At a glance of a chart they can synthesize more info out of ordinary person who read charts.
The reason is normal chart reader are not trained to see things unless someone tells you what to look for.

And super successful people in chart reading never never bother to teach people. Only theorist like Benny Lee teach people becoz he teaches for living!!!

Successful traders trades or invest for living.

PS I attended he class before back in 2003 he's crap.

Michael Tsen said...

sorry u took the course and think it was crap, basically the course he taught was suppose to be for beginners.

what u said abt 'teach for living' is true for most but for Benny's case, he actually make a living from mostly his own investment. what he taught in class is not even 10% of what he himself does, I think he himself is NOT able to quantify what he has been doing successfully yet ...

I have had earn 10x return at times but such experience is NOT worth sharing because in long run, another 90% lost would bring that 10x return back to 0 play ground. Telling ppl earning 10x return will only give ppl wrong target to start with, which carries more harm than constructive.

it doesn't matter if successful technical trader teaches or not, because whatever he shares, even if 100%, may or may NOT work for you .... you will have to 'digest' from them and 'apply' it for your own situation ...

as a matter of fact, through out years of investments, I haven't seen a TRUE investor base purely on technical ... all will have to eventually base something on the fundamentals, may it be financial or not. Guru's performance

Anonymous said...

There is the journey, there is the destination, you can walk, cycle, ride a motorcycle, bus, etc drive a car,van,lorry, etc you can fly there too as a passenger or even fly your own plane. Given the same vehicle... it depends on the driver. For me, fundamental analysis explains why something happened/going to happen and technical analysis shows me when it happened or it did not happen (no impact). Trading/Investing is a "battle" and going in with both arms is better, so I think... joe