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Bearish opinion on FSL

It just doesn’t seems good. Fundamentally this is the kinda stock you won’t hold for long term. Maybe will be good to punt. But a bad business will continue to be a bad business and kind of remind me of some US company like GM. Let us read at some blog post I’m following.

[SSI] In fact, the low formed on 11 Jun at 36c would be a strong support if price does decline to that level again.  Market participants would remember that price as the low and they could have made some money if they had bought more then.  More likely, however, the recent many times tested support at 37.5c would act as an effective breakwater in case of a decline. What about the upside? For now, it seems that the price could remain trapped in between the 20d and 50d MAs for a while. These assumptions are valid as long as everything else in FSL Trust’s business remains constant.

From a FA perspective, it is true that FSL Trust has very high risks and its propects seem bleak in the longer term but would it go belly up in the next few months? Rather unlikely as the world economy is still on the mend and the fortunes of the shipping industry are looking up.

If i do remember correctly, I’ve done a post on FSL. Hopefully that no one got in without watching their S(stop loss). This is when fundamental without diversification can be dangerous as inadequacy or overlooking details will be end of story.

[musicwhiz] Let me categorically state right now that even as early back as mid-2008, I was “warned” about the structure of Shipping Trusts and of FSL Trust in particular as being vulnerable and unsustainable. An expert and very detailed forum poster by the nickname of d.o.g. (Disciple of Graham, no doubt) pointed out that a shipping trust could be evaluated and valued based on a DCF (Discounted Cash Flow) basis, since its cash flows were “supposed” to be predictable, stable and consistent. When he ran the model through using an appropriate discount rate, it was discovered that the discounted cash flow value of FSL Trust was less than the share price at the time (above S$1.00). I chose to ignore that pertinent piece of advice at the time as I was indignant and obstinate and wanted to prove that the Shipping Trust model was sustainable and that the value of the cash flows would grow (through M&A of vessels) over time to render the original DCF analysis invalid. All I can say was that it was a very expensive piece of advice to ignore, and if you count in the opportunity costs of having the capital invested in FSL Trust, then the mistake is sadly compounded many times!

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