Investing

My Investing Method

In the last 3 or 4 years, I have used my investment method to select Latitude Tree which went up from Rm 1.00 to above Rm 8.00 within 30 months, VS Industry which went up 550% within 18 months and Lii Hen which has gone up more than 500% within 24 months. I have been a substantial shareholder of each of the companies.

I sold a large amount of Latitude and I am no longer a substantial shareholder.

Out of the 3 stocks, VS Industry was my best selection. From its last year 2015 annual report, you can see that I was the 2nd largest shareholder, holding 102 million shares. I sold all my holdings in the last few months to take profit.

How did I make so much money?

Since I retired as a founder director of IJM Corporation Bhd 33 years ago, I have been using several methods, as used by famous investment gurus like Benjamin Graham, Peter Lynch and Warren Buffet. They all preached value investing, buying undervalued stocks.

Of course, it is good and safe but you have to be very patient to make money. For example, currently there are many property developing company shares selling below their NTA due to the oversupply of properties in every town and city in Malaysia. Yes, it is safe to buy them but their prices will remain depressed until the property market turns around which may take many years.

There are many share selection criteria such as NTA, cash flow, healthy accounts, cash rich with no borrowings etc. I consider the most powerful criterion is profit growth prospect. Earning per share (EPS) growth is the most powerful catalyst to move share price. Even if the company has a lot of cash, the company will not give some to the shareholders and shareholders have no right to ask for more dividend.   The most important consideration is that the company must continue to make increasing profit.

My share selection golden rule  

I will only buy shares of any company which can make more profit in the current year than last year. By looking at the profit of the last 2 quarters and understand its business, I can tell whether the company will report increased profit at the end of the financial year or not. When the company reports increased profit, its share price will definitely go up. By using this method, I am sure to make money in 6 months when it announced its annual result. To be safe, I will not buy any share when it is selling at P/E more than 12.

I will continue to buy more shares if the company continues to report increasing profit. That is how I accumulated 102 million VS shares. I will start to sell as soon as I see the company reports reduced profit.

I will not buy shares of GLC, Banks, plantations, oil & gas related companies because their profit growth is too slow for me.

You can see the following 3 price charts of Latitude Tree, VS Industry and Lii Hen

lat vs lii

Readers are advised to check their holdings to see if they comply with my share selection golden rule before you lose more money.

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