Discerning investors can pick up some bargains

Their recommendation is: don't clean out your equity portfolio but pick up some good stocks.

Wasin Wattanaworakijkul, assis¬tant managing director of BBL Asset Management, said earlier this week that though investors consider a fall in stock value as a risk after picking up some good stocks, having no stock in the portfolio does not mean no risk.

"Equity investors who sell all stocks in the portfolio [fearing risks] will also face risk. No matter what the situation, cleaning up your portfolio is not the right thing to do. They risk failing to get returns on their invest¬ment once there is a SET turnaround," Wasin said.

Fund managers suggested that to avoid risks from putting money in stocks, investors must shift to stock selection mode as asset allocation alone will not get them efficient portfolio management.

They recommended equities as a good investment channel, reflected in highperforming equity funds.

Thai politics has heated up since the People's Alliance for Democracy started their street protests against the Samak Sundaravej administration about three months ago. Look at the statistics below.

Of a total of 900 mutual funds, 159 are equity funds. Over the past three months, returns on equity funds recorded an average growth of 1.22 per cent, while the SET Index fell 17.87 per cent. Over the past six months, the equity funds saw 2.1 per cent growth, while the SET fell 18.27 per cent. Over the past 12 months, equity funds grew 3.31 per cent, while the SET slumped minus 15.52 per cent.

Over the past three years, equity funds have given returns of 28.97 per cent, while the SET rose only 4.87 per cent.

The above statistics show that even at times of political crisis, equity funds have outperformed the SET.

Wasin said the extent of investment in stocks depends largely on an individual's budget. Once they invest in shares, can they wait for longterm returns? For example, once they decide to buy a share, they should ask themselves whether they can bear a price fall of 20 per cent. And once the stock touches their targeted price, they must sell it to take profit.

Wasin said if investors could answer these questions, they would be able to invest in the stock market.

Naturally, investors don't prefer buying stocks when share prices are falling. Most of them prefer stocks during a rising trend. For example, once the SET Index falls to 650, which is a significant fall and is the level to gradually accumulate stocks, most investors hesitate to buy stocks. They want to wait until the index falls further to 630. But when the SET reaches 630, they still fear the index will plunge further and avoid buying stocks.

When the SET rebounds to 650 again, they wait for it to touch 670. They regain confidence only when the index reaches 700, but that may be the level most people would take profit.

Wasin said in practice, once you buy stocks at 650, the index may fall further. But once it rebounds, the index will skyrocket.

Investors should keep longterm investment in mind, but there might be some situations when investors should sell stocks to reduce their risk. For example, investors should sell when the stock market is at the peak of its bubble.

Weeraphon Simaroj, first vice president of Thanachart Fund, suggested investors select stocks based on cash flow of the listed firms, especially during tough situations as at present.

This reflects the management's ability. Aside from cash flow, investors should consider the stock's pricetoearnings ratio, which should be lower than eight to nine times or the overall SET price to earning ratio.

The stock's dividend must be higher than 45 per cent or the SET's average dividend.

Theeranat Rujimethapass, head of Mutual Fund and Private Fund Business of Tisco Asset Management, said prices of many good stocks have fallen by 20-30 per cent.

He added that buying big market capitalisation stocks in the current sluggish market sentiment would have low risk.

He recommended banking and energy stocks, which have the potential to grow, with prices at below book value.