Competitiveness: “TAC a Buy with Valuation and Momentum Strategy” & Thai Royalist on the 3G Situation

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By Pooky, Thai Intel’s economics journalist

Before buying into the Seeking Alpha article on the Thai stock market listed, Total Access Communications or TAC-a great deal is being written about TAC and AIS, two major telecom firms in Thailand, joining hands to pressure the Thai government about the 3G mobile network-against TRUE-who is going about using current telecom bandwidth-to inject the 3G mobile system onto that available bandwidth. If you wonder what it is all about in Thailand, there are 2 theories going about on the 3G network.

One is the widely accepted belied that according to law, Thailand needs 2 telecom related independent bodies to make their rulings and subsequent bidding on the licensing of the real 3G network-on the bandwidth that is most suited for the 3G network. And since only 1 such independent body currently is in existence, the real 3G network is off course-off limits.

The other theory is Thai Intel’s exclusive, where a senior sources in the telecom industry told Thai Intel, however, quote: “The royalist elite military rule of Thailand are afraid that the 3G will bring with it a massive information explosion and exchange society which is a direct threat to their censorship of the Thai society and thus they are delaying the 3G network out as long as possible.”

Thai Intel reported on that telecom industry source, ahead of the much talk about attempt to get the 1 independent body to open-up the bidding for the real 3G network.

In fact that 1 independent body tried to get a 3G bidding going-but the Thai courts, which is one tool of how the royalist elite military rulers of Thailand continues to rule Thailand-struck that bidding attempt dead in its track.

That Thai Intel report, of the high ranking telecom source, if our readers have taken Thai Intel seriously, billions could have been made on the news-as with 1 independent body attempt at the 3G bidding-telecom shares rocketed up massively, but then with the court axing of the 3G bidding, the shares fell massively.

All in all, Thai Intel receives 2 e-mail saying thank you to Thai Intel for our report-with one saying, quote: “I made about US$ 300,000 on Thai Intel’s report.”

But mostly, as always, Thai Intel is followed by a small cult of believer-and thus mostly, when Thai Intel reported on the Thai 3G situation-as being that the royalist elite military rulers of Thailand will delay it out as long as possible-Thai Intel was mostly laughed at-even today.

See Thai Intel’s original report on elite delaying 3G ahead of the axing of the 3G bidding  here.

After that court axing of the 3G auction-an extremely negative sentiment “Backfired” on Thailand’s overall technological advancement development efforts as being a big joke-and the parliament, controlled by the royalist elite military for about 2 years now, after years of doing nothing, rushed in legislation to set up the 2nd independent body.

The latest is that it will be about 2 years before the auction gets started again for the real 3G network.

In the mean time, True-is pushing ahead with the fake 3G that exists on existing bandwidth-sort of like a crippled 3G but it will put True in the driving seat on 3G-and thus TAC and AIS have come out with seriously strong word-to the extent that AIS is now, after years of being sold to Temasek by Taksin-the local press are reporting on Taksin‘s involvement with AIS all over again.

Taksin, when he sold AIS to Temasek, was called a traitor of Thailand-and that sale went long way in why Taksin lost control of Thailand. TAC and AIS are seen as foreign owned and True is Thailand owned.

Did the royalist elite military rulers of Thailand made billions on the 3G court ruling with inside information?

Thai Intel is only happy we helped even out the playing field for our readers.

The following is from Seeking Alpha

Typically, long-term valuation is the main driver of stock performance, as shares of companies that are trading at a discount to their intrinsic values tend to go up over time (on the opposite end, shares of companies that are trading above their intrinsic values will migrate down over time). If we were to attempt to quantify this, it appears that aggregate stock movement can be explained by long-term valuation adjustments roughly 75% of the time. The remaining 25% are best identified as momentum markets, which simply implies that a short-term event has created an environment that makes investors less concerned with long-term value and more focused on short-term issues.

This shift in investor preference often leads to a move towards quality or “safe” stocks, and it is in these markets that we witness outperformance from a momentum-based strategy, which can be based on the momentum of price changes or earnings forecasts.

Due to its significant overall outperformance, we believe utilizing a trust-worthy valuation metric is of utmost importance in stock screening. The chart below highlights the performance of our valuation metric across the globe.

Table 1: International Valuation Performance: 12/31/1991 – 10/31/2009 (Percent to Target)

With that said, a simple valuation-only strategy can hinder the performance of your portfolio when momentum-driven markets are at play. Therefore, it is also important to consider the performance of momentum stocks. The chart below highlights the performance of our momentum metric across the globe.

Table 2: International Momentum Performance: 12/31/1991 – 10/31/2009 (EM Momentum)

Taking this one step further, we observed that over the long term, performance is significantly improved with the momentum overlay. In valuation periods, the overlay slightly lowered the outperformance when compared to the valuation-only strategy, but in momentum years, it significantly improved the performance. The table below highlights the performance when combining both the AFG valuation variable and EM Momentum variables.

Table 3: International Combination Performance: 12/31/1991 – 10/31/2009

We believe that a valuation framework is a tremendously effective starting point for your stock selection criteria. But because markets do not always act rationally with valuation in mind, it is important to protect your clients’ assets in these periods of distress or uncertainty. Adding a momentum-based variable to your selection criteria not only improves the overall performance, based on our analysis, but also helps eliminate the underperformance for periods of time when valuation alone does not work as well.

Today we will implement this valuation plus EM Momentum strategy to pick stocks from the three main Asian indices (Nikkei 225, Hang Seng, Straits Times) that rank in the top half of both metrics. The chart below illustrates how each long and short strategy based on these two variables works across each country, with the three Asian markets highlighted.

The companies listed below all rank in the top half of valuation attractiveness and EM Momentum within their respective countries.

The data tables provided above highlight the benefit of a Valuation/Momentum hybrid strategy.

About the author: Value Expectations
Value Expectations picture
The Applied Finance Group (AFG) helps investment advisors, institutional investment, consulting, corporate firms globally in accurately measuring corporate performance and identifying mispriced equities. AFG developed its proprietary framework, Economic Margin, to correct distortions created by… More

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