Investing in the Kuwait Stock Exchange – Picking a Winner

Once in a while, I need to write something smart in order for people to believe that I am not just another pretty face 😛

So without further ado, here is a SUMMARIZED version of how to pick the winning horse for your financial security:

  1. Selecting a good stock is a careful mixture of instinct, luck and pre-planning. There have been several one-hit wonders, however the proverbial sword of Damocles looms eerily over any stock – it can have the potential to make or break you.
  2. As with everything in life, risk = reward, higher risk, higher reward. You can end up buying a junk stock for under 100 fils per share that suddenly sky-rockets due to some important invention/ law/ news etc. or you can buy a blue-chipper at a very high price and find it collapse faster than a chocolate tower at a child convention.

Now, armed with that information, here is what you need to do:

  1. Find the companies dividend distribution (done annually) for the past 5 years in order to draw up a trend. the KSE website used to provide a PDF report to this regard, however I have been unable to find it. I did however find the information, comment in the section below and i’ll share that info with you.
  2. Through the usage of EXCEL, prepare sheets of the performance of the stocks for the past 5 years. Combine these together through PIVOT tables in order to review each stocks cash/bonus shares distributions.
  3. Compare the list you made above with the LATEST days transactions for the KSE. This will help you determine which shares are currently trading and which are not. In addition, it will show you the latest price reached by said stock, so you know how much it’ll cost you.

Cash and bonus shares are distributed as a percentage of the shares you own. Meaning, if you own 1,000 shares and the company announced in its AGM that it was distributing 20% cash and 15% bonus shares, you get 0.020 fils per share in cash, which gives you a good KD 20, and you get 15 bonus shares, so you end up owning 1,015 for the next year.

Now I have done the analysis for 2010-2015, compared to the price per share and selected a few stocks I believe might perform well. I am no investment analyst, the only sale I ever made was when I cashed out of ALAFCO after it reached a 100% profit (doubled in price since I bought it), it has since fallen back down.

It is important to realize before committing to a stock to review its GRAPHICAL PERFORMANCE through the KSE website, that it can do. This helps you to see how long during a period of 5 years the stock was not trading, which affects its liquidity in the long run.

For more information, feel free to reach me 😀

Happy trading.

KSE

It’s a hard knock life….

DISCLAIMER: the article above summarizes the feelings of the author alone, he is neither a financial wizard nor investment guru, any losses incurred by anyone following this advice shall in no way, shape, or form be attributed to this author, as such as no profits gained by individuals would be shared with the author. The views expressed are his own and not in meant to act as investment broker/ agent for anyone. You are responsible for your own financial security.

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