Personal Market View - Concept play, quality stock, and value investing

Concept Play, Quality stocks and Value Investing
By ckchoy
Investing is one of the way to pursue financial independence.  There are many successful players/experts/gurus who made a fortune out of it.  Just take 2 well known stock market gurus as examples: W. Buffett and Master Hu Li Yang 胡立阳. Many of us know them, and when we read back their philosophy and advice, we are touched and want to follow them.  One of their similarity quotes: contrarian investing - be fearful when others are greedy and to be greedy when others are fearful – this is the only way you can buy low sell high.

But in reality, not many people can do this PERSISTENTLY.

I’m not focusing on contrarian investing strategy, just wanna recap something: concept play, quality stocks and value investing

Now let's take some stocks as an illustration:
Stock               NAV                P/E            14/6/2011
Genting            0.46                   32              1.89
KepCorp           4.6                     11            10.86
Capitaland       3.27                     9              2.91
Gallant             0.51                 131              0.395      

Genting, many investors know this counter, almost everyone believes its business model is fantastic as casino as a house has absolute odds advantage over gamblers. A sure make money business. So is its good? Answer is yes of course.  But when the stock moved from below 0.5 and slowly appreciating, and when it surpassed $1, some were still in doubt, thinking it is overvalued as it rose from 0.5 to $1, almost double. But when it surpassed $2 and hit high of 2.35 and then retreated back to current level at 1.9, now you will hear many tones saying, “ hey! It looks cheap now” Many people minds have been programmed that this stock moved down from 2.35 to now at 1.9, so it is cheaper now.  Almost all have forgotten this stock was moved up from 0.5 to 1.9. So is it cheap or expensive now?
Not many people realize actually Genting from 0.5  to 1.9 has moved from a value counter to a concept play counter.  What is concept play counter? It is a counter when people have high hope of its future earning,  resulting it is overvalued at present. That’s why Genting’s P/E has been pushed to above 30, people are expecting more earning in future, people are expecting more tourists visiting Genting and more gamblers visiting its casino. So we can say people are starting to become greedy about genting’s earning.

KepCorp is an index stock, its fundamental is good as its earning is at least stable and flooded with many contracts. Hence we may say it is a quality stock.

Capitaland with NAV at 3.27 and P/E at 9 and as a STI component stock is a value counter, because its share price is lower than 3.27. And if you buy now, you are getting a discount now. But how come there is a discount here? The reason is people are negative about properties especially government curb moves and so does China, they have similar move to curb and cool down overheating property market. If so, should we avoid property counters? Needless to say, when the stock moved down from 4.2 from Oct 2010 till now, many have factored in all the negative news and many have avoided the stocks.

Gallant although has higher NAV then share price, this counter is not making enough money resulting a high P/E, hence it is a concept play counter for now.

In conclusion, my view is Genting and Gallant are concept play counters, Kepcorp is a quality stock ( but I see we can still wait for it to become cheaper before enter ) and Capitaland is a value investing counter.

From these examples, can we see anything and spot any opportunity? It depends on how you look at it.  And if you wish to follow the experts’ philosophy of contrarian investing – remember this:  
be fearful when others are greedy and to be greedy when others are fearful

So how we can apply it now? All depends on how you look at things.