Suitable for Long Term Investment - AMWAY

I am not in any position to provide any investment advice and my commentary and analysis is solely based on my personal opinion and is should not be construed as any form of advice. The reason why I bring up this company (like in my other stock commentaries articles) is because it is being recommended by an investment adviser. Yes, investment advisers are licensed by the Securities Commission to provide investment advice (which is basically buy, sell or hold call and in many forms).

Yesterday, the counter AMWAY (which I think need no introduction here) was one of the counters that were being reported in the Bursa Malaysia CBRS scheme yesterday (19th of August). (The CBRS scheme is a free research reports online by various brokers, sponsored by Bursa). However, if you look at the report, it was prepared on 14th August. Hope Bursa can improve this delay problem. Old news is no news.

Why AMWAY and not the many counters, you may ask. In a market like this, I do not see many opportunities and advisers were in very difficult position because most of the time, the stock that they recommend would normally cause the price to fall. This is nothing new, actually.

So why AMWAY? You see, I am a trader and I do not like to hold long term positions. The only stock that I currently hold long term is GENTING, which is not more than 3 years now. AMWAY is not a good stock to trade because the trading range is small and trading volume is relatively low all the time.

But you see, long term investors love price that is not volatile, price that do not move in big trading range. AMWAY has been trading in a 1% trading range (or RM6.30 to RM6.90) for the past 5 years. Price of AMWAY is currently at RM6.80.

The company is fundamentally strong (Download the report from Bursa's website). Dividends were consistent and company's cash flow is strong. For the past 5 years or so, the company's share price was not affected much by any events.

Therefore, with less volatility and strong fundamentals, this company may be good for long term investing. However, a lower risk price for accumulation would be at the support level of the current trading range, which is about RM6.10 to RM6.30. Current price is a little overbought.


Weekly AMWAY chart as at 19 August 2008 using NextVIEW Advisor

Commentary and Analysis by Benny Lee

If you would like to know who you could identify tarding/investing opportunities using price charts, I will be conducting a one day workshop this weekend (23rd August 2008) for those who are still new in technical analysis and the financial markets. Please contact NextVIEW at +603 2770 9388 for details and registration.