The purpose of writing this piece is to review my own mistake. Like all investors, I also sell too early to take profit. They always say that no share can go up and up indefinitely for whatever reason. So, they sell to take some profit because they believe they could buy them back during correction at cheaper prices.
Unfortunately the correction is usually less than 10% for really good shares and after deducting the transaction and other cost it is not worth the risk of selling too early. For example, in the price charts of Latitude, VS and Lii Hen, you will notice that the correction is usually very small, usually less than 10%.
You can only make profit if you know exactly when to sell it and when to buy it back. But very often, you sell too early because you will be tempted to sell as the price is going up.
Most people will not buy back the shares that they sold if the correction is less than 10% and they would not buy back at higher prices than the prices they sold. They would not want to admit their mistake.
There is absolutely no reason to sell if the company continues to show increasing quarterly profit. In fact, you should be bold enough to admit your mistake and buy it back at higher prices.
A few of my friends, sold Latitude, VS and Lii Hen when they were under some minor corrections and did not buy back when their prices went higher and higher.
Eventually Latitude went up from Rm 1.00 to above Rm 8.00 within 26 months, VS and Lii Hen went up more than 500% within 2 years. Fortunately, I admitted my mistake of selling early and bought back to become substantial shareholders of these 3 companies.
As you can see, Lii Hen has been producing increasing profit in the last 8 quarters and its earning per share (EPS) was 11.68 sen in 1st Q 2017 in comparison with 5.97 sen 1stQ 2016. If you have sold earlier, it is advisable to buy back now at around Rm 3.08 per share.
You must ask yourself these questions:
- In the last 2 years, did you buy any of them?
- If you have bought, when did you sell?
- And did you buy back at higher prices?