Investing

Share Investment Lecture  

 

I started full time investing is the stock market after I retired as founder director of IJM Corporation bhd. in 1983, 33 years ago. In 1983 I had my heart by-pass surgery in London Harley Street Clinic. While I was recuperating I read the Financial Times that China gave notice to regain the sovereignty of Hong Kong. As a result the stock market crashed. Hang Seng index dropped to about 600 points. With a capital of Rm 200,000 I made so much money that within 3 years I bought 46% of a stock broking firm called Kaiser Stock and Share Co. Ltd.

To make money during the crash was easy. All I needed was bravery and courage. After that experience, it is not so easy unless I have some knowledge of selecting stocks. I started reading the methods as practiced by Warren Buffet, Benjamin Graham, Peter Lynch and others. All of them are preaching value growth investing which I found to be too slow for me.

For example, currently there are many property counters selling below NTA. It is safe to buy them, but you have to wait for a long time for property companies to make increasing profit. Open your eyes you will see that there are an oversupply of properties in every town and city in Malaysia.

For the first 23 years, I was trying various methods and was not so successful. It is only in the last 10 years that I found my secret recipe of making quick profit. My secret recipe is my share selection golden rule which I have elaborated in an article with the title “My Share Selection Golden Rule”.

I am only a civil engineer. I am not an accountant. All you need is common sense and the ability to think logically.

Our brain has 3 basic functions, one auto function that controls breathing and blood circulation. The 2nd controls your emotion such as fear and greed. The 3rd controls your emotion to think logically. Most people cannot control their emotion to think logically. If all investors can think logically, then all shares would be fully valued and you cannot find really good shares to buy.

So accounting knowledge is not so important. The most important is the ability to control your emotion of fear and greed so that you can think logically to buy or sell shares.

There are several criteria for share selection, such as NTA, cash flow, discounted cash flow, not too much debt, return of equity, cash rich etc. As a non accountant, I only have a faint understanding of all these accounting jargon.

The most important is profit growth or EPS growth prospect which I have explained in greater details in my article on my golden rule.

You must bear in mind that no shares can continue to go up or come down for whatever reasons. It must pause and trade within a narrow bank. Just look at VS industry for example. After it has gone up for a while, it started to move side way, a consolidation period.

As I said before, 3 persons can buy the same share at the same price and at the same time but each of them will have different result.

The small trader will sell when it moves up 20-30 % profit and wait for correction to buy at a cheaper price. What happen if it continues to go higher? Most people will not buy back at a higher price than they sold.

The 2nd like most investors will sell when it has gone up 80-100% profit.

Only the super investor would not sell as long as it continued to report increasing profit. In fact, I continued to buy more and more when I saw it was reporting more and more profit. As a result I accumulated 102 million shares to become the 2nd largest shareholder of VS as shown in its 2015 annual report.

TREND: Never buy any down trending stock even if it is very cheap because you do not know when its price will go higher for you to make profit. Always buy up trending stock because you can expect its price to go higher after you have bought it. Just in case it drops you can cut lost.

Margin Finance: If you have experience in making money, you should use margin finance to increase your profit. The current interest rate is only 4.8% pa.

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