United States Natural Gas Fund (UNG)

United States Natural Gas Fund (UNG) is an ETF to track the Natural Gas prices of Futures contract. Natural Gas is energy commodity and the price is influenced by the supply and demand condition. The ETF price has been beaten down 81% since its historical high of $63.48.

I am preparing to long the stocks as the economy will recover eventually and the energy consumption will increase in the long run. Furthermore, natural gas consumption will increase in the coming winter and this energy commodity price is expected to go up.

UNG is breaking out from its down trend channel and going to test $12.22 resistance level (61.8% Fibonacci Retracement). If it breaks and stay above the resistance turned support line, the stock price will probably be moving upward. The stock price is currently above its 20D & 50D MA support lines. If the stock price fails to break the resistance, it may move down to about $9.00 level.

UNG has just to trigger a “Parabolic Stop and Reverse” buy signal on the daily chart. MACD, RSI and Stochastic are very close to show bullish convergence.

My investment plan
Entry point = about $12. If the stock price fails to break the resistance and retrace back to $9.00, I will buy more and do a dollar cost averaging down.
Investment Time Frame =  1 to 3 years.

SingTel – Fundamental & Intrinsic Value

Base on latest 2009 full year financial report:

  • PE = 14.9
  • Dividend Yield = 3.87%
  • NAV = $1.39
  • Net Earning = 23.1% (26.7% in 2008)
  • Current Ratio = 0.74 (Similar industry is 0.55) 
  • ROA = 10.4% (Base on 2009 Full Year)
  • ROE = 16.8% (base on 2009 Full Year)
 
 

Stock Background

  • Historical high = about $4.10
  • Current Price = $3.23
 
  
 
 
Intrinsic Value Calculation
PE Model
  • Fair value PE = 15, intrinsic value= $3.24 (base on EPS $0.21648)
  • EPS Growth Rate = 11.3%
  • PEG = 1.32  

DCF Model
 I use Free Cash Flow instead of Net Operating Cash Flow to calculate the intrinsic value. The reason is SingTel is a telecommunication company which need to continuously invest in the networking infrastructure to generate revenue and profit constantly. The intrinsic value is $2.45.

 

 

Discounted EPS Model

  • EPS Growth Rate = 11.3%
  • Discount Rate = 5%
  • 2009A EPS = $0.21648
  • Intrinsic Value = $3.02

Regardless of which method to calculate the intrinsic value, SingTel seems to at its fair value or over value (base on Free Cash Flow DCF Model). Furthermore, the stock price moves sideway for the past 10+ years. I will not buy SingTel unless the stock price falls below $2.50 and there is an increase in dividend yield in future.

How do I plan my exit point?

Selling off requires lots of discipline & determination because this decision determine whether we lose money, make money or make less money. It is not uncommon that we fail to execute or change of the exit plan depends on what we see, what we hear and what we feel.

Below are my “own guidelines” or “rules” when selling off my positions:

  • When the profit target is met (for momentum investing) or the stock price exceeds the intrinsic value (for value investing). I normally sell off 50% of my position to take profit and leave 50% to let the stock price continue its course as long as there is not trend reversal spotted in the chart.
  • When the stock price reverse its trend when the reversal pattern (e.g. head & shoulder, double top or triple top, etc) is formed.
  • When the stock price starts the down trend & the stock price below 20D, 50D and 200D MA. This is a very tough decision to make to cut loss and I have to keep reminding myself that I can buy the stock back at lower price next time! I look for opportunity to sell when the stock rebounds on a down trend.
  •  

  • When the price move sideway for a long time unless this is a dividend stock. I can use my money to invest in other stocks for better gain.
  • When there is a fundamental change in the stock and I don’t foresee the stock price will rise in the near future. I sold Creative Technology which close to 40% loss because Creative Technology has lost its competitive advantage in Sound Blaster and its MP3 products.

Though I have worked out my entry and exit points, I still have to take full control over my emotion of Greed and Fear and need to have very good discipline to stick to my trading rules. I am learning to control this emotion every day & every trade, having buddies like Wilson & Daniel help me a lot in improving in this aspect.