How to make a call?

Recently, I've received an unpleasant, albeit polite comment (from reader nmb), which I have appended below:

Although i had read your blogs for few times, due to the recommendation of a friend, i found your comments is too technically, mean u describe most of the counters based on technical point of view.

When u raise a particular counter attention, i am afraid most of the times, it is too late. You only state the counter that had fly high after some announcements.

Honestly, i dont think your blogs or comments makes much differences to many other investors like me which hope to get first class news and tips.

He further added:

I just wish that from the convenience of Internet, we can share some good news, analysis, or even insider tips (if we lucky), prior to the surge of a particular counters.

Finally, the conclusion is very simple, we want every traders to make profit from KLSE.

By the way, good job to Mr. Alex, and i hope improvements will be achieved.

This is a serious comment & it deserves to be addressed properly in a post. To start off, I would say that we are only human and we would much prefer flattery to unpleasant comments on our blog. However, I believe that continuous learning & self-improvement can only take place if one faces up to his or her shortcomings. In that spirit, I would like to address the comment posted by the reader nmb.

Let's begin with the purpose of this blog, which is a platform for me to communicate with my clients. Before I've started this blog, I used to write to them by emails. I find this to be a one-way communication, with very little feedback. In fact, this hasn't changed much as most of my readers are not my clients & none of my clients has ever posted any comments on my blog. However, I find the blog to be a better mean of communicating with my clients for the following reasons:
1. I can communicate with a wider audience which led to an improvement in my calls.
2. I can receive more feedback, comments & questions which allows me to look into different stocks or areas that I've overlooked.

The setting up of this blog has been a great learning experience. It is like taking a crash course in investment because one has to be familiar with something before one can comment on it. This led to a lot reading & studying. I have maintained a rigorous ritual of reading up on company news and announcements, especially results announcements. For example, I read about 800 results announcements in the last 2 weeks of August. This process is repeated in the months of November, February and May- as most of the listed companies have their financial year end at either December or June (with a small number in March) and as such, they must announce their quarterly results towards the end of the second month after the end of each quarter.

The information in this blog is generally published information. My input is mostly in the area of analysis & the drawing of conclusion. To do that, I rely on my working experience as a banker and remisier as well as my training as an accountant. I have also read up a fair bit on technical analysis which I strongly believe is critical to successful investing.

To make general market call, one must have some working knowledge of the economy & the impact of various policies or decisions taken by policy makers. That's one area that I am quite comfortable with. Before the age of the internet, I used to read the columns of Lester Thurow, Milton Friedman and Paul Samuelson in my school days (as my father was a subscriber to Newsweek) and today I continue to read up regularly on economics matters. This knowledge has come in very handy (here). I supplement this with my technical analysis of the main market barometers, such as DJIA and our FBM-KLCI (here).

When it comes to stock selection, I rely on fundamental analysis as well as technical analysis. A good stock satisfies a fundamental analyst but a great stock satisfied both the fundamental analyst and the technical analyst. Sometime, a stock satisfied the technical analyst but failed to impress the fundamental analyst or vice versa. We should not ignore such stocks because the fundamentals or the technicals of that stock may change one day. However, I would normally treat a stock that satisfies the technical requirement as a trading BUY.

If you do not do any fundamental or technical analysis before buying a stock, then you are either buying blindly or based on tips. Tips can come from many sources, with the usual one being your remisiers' tips and the more desirable (but illegal) one being the insiders' tips. The later is hard to come by and the former is hard to avoid. When you are in the market long enough, you would learn one very important lesson- there is no such thing as a sure thing. Similarly there is no such thing as first class information. A person with first class information would not want to share it with you unless you are his brother-in-law or until he is bloated with the same stock.

Having said what I must say in my defense, I must also admit that some of the points made by reader nmb are fair comment. Why call a buy on a stock that has gone up? Why not make the call them before they go up? I've tried to do the later but it is next to impossible. Many a time when you made a call on a stock that you think is about to move, the stock just do nothing but sit pretty (here). To be sure, I would rather make the BUY call when the stock has achieved a technical breakout. That would necessary mean that the share price has gone up- sometime a bit, but more often than not, quite substantially. When the readers get into the stocks, they may suffer a whipsaw. This happened very often when the stocks in question are fairly illiquid. Unfortunately, this is part & parcel of the game. The way to avoid this is to get in slowly or later but who can say whether the rally would wait for you. A train that has left the station would not reverse to pick up a few strays (here).

Finally, nobody can read the market correctly all the time. In a bull or a bear market, you appear smarter than you really are. In an uncertain market- either in its bottoming phase or its topping phase (like now)- you appear dumber than you really are. But, are we... dumber now or smarter then or just plain lucky?

To reader nmb, I would like to say thank you for the comment. I appreciate the fact that you take the trouble to give your constructive feedback.