A few comments posted on Facebook Group - Nepalese investors' Bandstand

Rajesh Sharma

A.   B. K. Formula:
1. Buy EBL at low price, sell LBL at high price and earn money.
2. Buy LBL at low price, sell EBL at high price and earn money.

2.    Strategy 1: Make people believe EBL and LBL will merge
Strategy 2: Make people believe LBL and EBL will not merge.

3.       Repeat the action scene the whole year or till the strategy remains in lactating period.

4.       We should forget about merge between EBL or LBL or no merge; just we should follow B. K. thoughtfully.

B. Code words in Nepali share market:

I will sell - ("X" company's shareholders) MALAMAL
I will buy - (To "X" company's shareholders) DUBAYO
The grapes are sour: ("X" company) KHATTAM, 
I am holding: (From "X" company): KAMAI DOUBLE

And, there are many more........

C. When less than 10 kitta shares are traded, it would be better not to make it appear in floor sheet. It has become a tasteful fodder for the rumor mongering animals to play with prices.
I have seen quite some holy cows becoming victims of such rumor.

D. 1. About Everest Insurance Company

For investors, it is not a company to invest in. But for traders, they follow the trend and buy and sell at high also. As investor, I am not ready to buy even at much lower price.

2. Nepse Index

Dividend declaration could be a major factor that could take Nepse up but may not go quite high. I am expecting around 1680 by the end of Bhadra.

3. Low EPS and over supply of shares

Eps is reasonable as price of a share unit has gone down. Over supply is a factor that influenced the price fall heavily.

4. Online Trading/Broker licence to banks

On line trading may be there by January/February. But, I do not see that will bring see-change in increasing the volume. That will be most comfortable for us with all information, technology and equipment on hand. Broker licence to banks also may have nominal impact on volume.

5. Not Company's performance but other secondary factors drive the market

Yes, the market is at its infancy and a few try to drive with some fancy ideas or money or tantrums.

6. Market maturity

Politics has done tremendous harm. May be now it is time for political stability after the election and it will provide level playing fields to all institutions and professionally specialized areas to grow.

Note: Nominally edited

Market is falling down: What to do?

Rajesh Sharma

Market is falling down and this is not a normal situation. Dividend time is very close and performance of large majority of the companies is good. Hence this trend may reverse anytime soon. However, during this period, we could do the following:
- Buy if we have surplus fund.
- Rearrange portfolio, if we need to.
- Sell some and buy after some time, if the market continues to fall. This option is a bit risky.
- Wait patiently and hold.

In any case, let's not cry as that would not give any solution. Hope is human and keeps many surviving pleasantly even in difficult days. There is life beyond share market too, let's live that life till we have leisure time here.

Share buying and selling

Rajesh Sharma

My comment on Dinesh Shrestha ji's post (Nepse Discussion Forum) about sellers in hurry to sell.

Dinesh ji, everybody has different circumstances, objective conditions, choices, preferences and liberty to decide. The sellers also wish to maximize profit and sell thinking that they are right. May be they are right or may be they are wrong. In an uncertain phenomenon, only future may pass judgement on their decision. You are also right in your perspective. But, right now, we could not say who is right.

Comment on EBL shares falling prices

Rajesh Sharma

I have received a good number of messages in my in-box sharing concern about falling prices of EBL.

With adjusted capital of 5.74 Arab, reserve 5.88 Arab, EPS 43.78, P/E 30.90, Net worth 229.99 and Assets per share 2596.04, Everest is one of the very good companies. And, in such a situation of tremendous growth, it has maintained its basics sound.

As far as price of its shares is falling down, primarily so is Nepse index and preference of investors. When investors, particularly traders prefer, even HDL shares could see golden days of above 2000 price tag.

Therefore, it is all about demand and supply in one side and some deliberate moves to influence prices on the other might have resulted in fall of prices.

The company is where investors like to focus on and the trend what makes the traders looking into.

As an investor, I will hold my EBL shares and I am not too much concerned about daily accounting of paper profit/loss as long as the company is performing well.

Disclosure: My fourth highest investment is in EBL.

Some notes on Share Market

Rajesh Shara

My conversation (on messenger) with a friend this morning. My persprctive is as below.

1. About Everest Insurance Company

For investors, it is not a company to invest in. But for traders, they follow the trend and buy and sell at high also. As investor, I am not ready to buy even at much lower price.

2. Nepse Index

Dividend declaration could be a major factor that could take Nepse up but may not go quite high. I am expecting around 1680 by the end of Bhadra.

3. Low EPS and over supply of shares

Eps is reasonable as price of a share unit has gone down. Over supply is a factor that influenced the price fall heavily.

4. Online Trading/Broker licence to banks

On line trading may be there by January/February. But, I do not see that will bring see-change in increasing the volume. That will be most comfortable for us with all information, technology and equipment on hand. Broker licence to banks also may have nominal impact on volume.

5. Not Company's performance but other secondary factors drive the market

Yes, the market is at its infancy and a few try to drive with some fancy ideas or money or tantrums.

6. Market maturity

Politics has done tremendous harm. May be now it is time for political stability after the election and it will provide level playing fields to all institutions and professionally specialized areas to grow.

Note: Nominally edited

Way of selling and buying shares: my perspective

Rajesh Sharma

A few friends have asked my way of buying and selling shares. It means my strategy in selection of shares for buying and selling. Thinking that it may help to some new friends I have compiled, edited and posted by responses below.

1. From 2008 to 2011, I was governed by gut feelings, market buzzes, seniors' advice and reading conventional indicators like P/E Ratio, EPS, Net Worth, etc. During that period, I had huge loss not only because my orthodox investment strategy, but primarily because the market nosedived.

2. From 2011 onward, I started to focus on companies. I studied about composition of companies' board/management, history, performance including earnings, reserves, dividends, etc, companies' standing in their respective business sector, court cases, growth prospect etc. This changed focus influenced me to move toward investment from trading. However, till 2015, I was like a mixed breed practicing both - investment and trading. However, since 2016, I moved to investment with exceptional acts of trading. Therefore, my way of buying and selling may not be that fretful for friends in trading field.

3. I have tried to identify my areas of strengths in understanding business of different sectors. Lately, I realized that I am novice in hydropower, hotel and manufacturing. So, I stayed out of them. NTC and HIDCL as mentioned "others", I thought are non-movers. So, I did not keep them in my list of preference. I considered MFIs quite risky and so, though occasionally, I traded on MFIs but did not invest. Now, I had just commercial banks, development banks (excluding MFIs), finance companies and insurance. Hence, I concentrated on BFIs and insurance.

4. I had done quite extensive exercise on safe and secure companies, share retention rate of companies/ changing hands faster companies, price range-wise classification of companies etc. This way, I had selected 52 companies in the beginning and after more study of select companies, I have narrowed down to 30. I have invested in 9-10 companies at a time among these 30 companies. I will reassess these companies vs. rest of the companies after the companies will declare dividend. This exercise I have planned for January/February.

5. I continuously follow a good company with high probability of growth till it reaches to silent phase. When most of the people start showing doubt and start staying away, and at the same time the price comes down, I buy. And, when that becomes a hot potato, I sell. This is primarily a Buffet Formula but bringing it into practice is challenging.

6. For trading, we should have a good understanding of trend and for this technical analysis may help a lot. For investment, we need to understand a company and fundamental analysis may help us. I am not so good in technical analysis, and hence, naturally I go through fundamental analysis and I moved primarily to investing.

7. After all analysis, cautions and validation, profit/ loss in share market are Siamese twins. I have seen big losses and big gains as well. Hence, we should take risk according to our situations. For the risk avoiders and the Hara-kiri share market is not the right place, I believe. Also, patience pays here.

Note: I have posted long time ago some of my exercises on companies in my blogs – www.sharenepalcomments.wordpress.com and www.stocksofnepal.blogspot.com. Though the exercises have not been updated in today's context, they may provided historical perspectives. 

Some comments on VAT, Brokers etc

Rajesh Sharma

My comments posted on Nepalese Investors' Bandstand, a Facebook Forum

June 30, 2017

1. If the brokers do not wish to damage the relation with the investors, they have to apologies and should open the market Sunday unconditionally. They could approach the tax office/Finance Ministry for negotiation and settlement. Or, they have to approach the court for dispute resolution and settlement.

July 02, 2017

1. The regulators should ask the brokers the legal ground for not operating in the market yesterday and should take stern action. Also, SEBON should start expanding the number of brokers by opening licence for new brokers and by providing licence to banks.

Finance Ministry should strictly prohibit unionism of brokers in the larger interests of the investors and national economy.

 Investors should start/continue mass actions/agitations /representations/filling case in the court etc, if regulators and brokers continue to harm the interest of the investors.

Overcoming fear is too difficult. Market is under the grip of fear now. By that time, when many small investors get rid of fear, they would have already lost millions together.

2. The brokers played rowdy Thursday. They may do again and again as their leadership seems a bunch of headless chickens. Neither they have professionalism, nor cool head, nor empathy. Hence, the strategic remedy is to expand the broker base by providing licence to new brokers and merchant banks.

Also, this is the right time to establish another stock exchange. This will bring competition resulting to better performance and will help expanding the capital market.

Let's lobby for:

a. Second stock exchange,
b, Broker licence to banks, and
c. Increasing the number of brokers by providing licence to new applicants.

3. Share Market and VAT (my limited understanding and perspective.)

3.1. In the market, there are a few people who believe that 13% VAT is applicable in the amount of entire transaction. This group is composed of lay persons and greedy share grabbers. Strange but it is happening here.

3.2. Some argue that VAT is applicable in the commission amount the brokers get but are confused who has to pay -brokers or investors.

3.3. Others are divided on the issue of nature of share business. Is this financial service as that of banks or is this value adding business like that of consultants. If this is financial service, no VAT is applicable and if it is value adding business, then VAT is applicable. The ambiguity in the law is a problem and that should be clarified first. This is an issue that affects the entire capital market community. Hence, all of us - SEBON, NEPSE, Brokers and Investors should plead with Finance ministry that Share Market transaction activities be classified as Financial Services. This will solve the problem of entire capital market community.

3.4. In case if VAT is applicable, by its nature and application, the end beneficiary of the value adding goods or services have to pay the VAT. And, sooner or later it will be collected from us - the investors. But, this is a very small amount which is 13% of the commission amount we pay to the brokers. This reality we have to acknowledge from today itself.

Hence, collective, by being all together, let's lobby for classifying the services in share market as financial services like that of banks. The brokers did foolish things last time, let's not do like that, but let's do something together for our collective good.