Cimb Strategy Paper

Topics: Risk, Investment, Economics Pages: 5 (1518 words) Published: February 20, 2013
Strategy Explanation Paper
–Amazon Lily Team (Petra Christian University, Indonesia)
Investment Objective
Our investment objective is to seek an abnormal profit in 3 weeks trading period with minimal risk, to achieve Top 3 National position. Investment Strategy
In order to achieve our investment objective, we created rule of thumb as follows: •Abnormal profit
In order to gain an abnormal profit, we seek a stock with high volatility. Before the competition started, we did a lot of brainstorming, not just within us but within our university mates who also joined this competition. Through that, we learn stocks from various conglomerates group perform better and more volatile than others. We sort our list from Bhakti Group, Bakrie Group, Lippo Group, also Sinarmas. We also learnt that a diversification doesn’t minimize any risk, yet it reduces our probability to have an extraordinary profit. So we decided we need to all-in one on stock, which we quitely sure it would upsurge on the trading period. Stock selection is very crucial here. Besides it should provide high volatility, we should seek a stock with enough liquidity for trading with size of 800 million Rupiah. We won’t choose an overly liquidity one which means a trade off with the volatility itself (such as bluechip stocks like Astra International or Indofood). We seek stock which is easy to play, have a regular pattern to follows. The selection is limited on Indonesia market since: 1) we don’t familiar with another ASEAN market, and 2) Jakarta has performed better than any other on the list in recent years. Eventually, we are right on that.

Managing minimal risk
As we mentioned before that diversification doesn’t minimize any risk, yet it reduces our probability to have an extraordinary profit, then we looks for way to managing the risk. We define risk as not only loss, but the actual return is below the expected return, is also a risk. We learnt that human will be cautious and proceed with good judgemental if we are on a life-and-death situation. So we decided to take the same position (of course with different sum of money), at our real trading account. Through this, we believe we can work very discipline following our trading plan. We may also set automatic cutloss point on our online trading platform, setting trailing stop and automatically get notification (by SMS) on our mobile phone when its already executed on real platform; so we may proceed to execute it on CIMB platform in no much time. By doing this, we don’t need to put much emotion by watching the running trade, on which people usually do common mistake (sell good stocks too soon or not execute cut loss on bad trade). But by mirroring our trade into real one, it seems we have fewer probability to win with luck only, on which historically many winners on some competitions before have done it. We can’t execute on a stock which its price increase much without any related information, since it involves our real money, and we do (still) love our money. •Achieving Top 3

Our movement should secure our position at national top 3; by which we can move to an aggressive movement to adjust our ranks, or we can move into more secure (but still offering good upside) stock to lock a certain amount of profit. Trading Strategy

Setting Stock Selection
As our investment strategy rules that we need to choose a potential stock with high volatility, we list and find various stocks as follows:

BHIT (from Bhakti Group), FREN (from Sinarmas), MLPL, MPPA, LPKR (from Lippo Group), BUMI, ENRG, UNSP, ELTY (from Bakrie Group), also KIJA, AISA, and PNLF for a safe-haven stock (which we don’t use it at the end because we don’t secure the 1st position). We learnt and chose these stocks, also to minimize the effect of uncertainty from global market, since the movement (although we don’t calculate, we learnt by our experience), relatively low-correlated with global market and local index. The movement mostly comes...
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