Investing

Hengyuan: A blessing in disguise

I have been financially supporting the opposition political parties to kick out the corrupt BN Government. About 3 months ago, 3 income tax officers came from KL to raid my house in Ipoh and suspended my current account with Maybank. I miss most is my credit card.

In view of the coming general election, the Government must be so desperate that has instructed Maybank to cut down my wife and my margin facilities from Rm 40 million to Rm 10 million.

Ever since I started doing business I always borrow large sum from the banks. I have always been able to make far more money than the interest I need to pay the banks.

For share investment, besides our margin accounts with Maybank, my wife and I have big margin accounts with T A Securities and Hong leong Investment Banks.

I have big margin accounts with Affin, Kenenga, RHB and CIMB. Our total margin finance is more than Rm 200 million. All these huge borrowings sound unbelievable. I have always been able to make far more money than the interest charges. I can easily make more money than the current interest rate of 4.8% pa from the stock market.

Talking about our Maybank margin accounts, to reduce Rm 30 million from each margin account, I have to sell about Rm 60 million worth of shares, totalling Rm120 million. Since the daily volume for Hengyuan is several million shares, I sold all our Hengyuan shares aggressively. I also sold all our Hengyuan shares we have in all the other banks.

At one time my wife and I have a total of 8 million Hengyuan shares. Now we have only a few hundred lots left.

We are now cash rich and looking for some good stocks to buy. Can you readers please recommend some shares with good profit growth?

GOD works in mysterious ways

As you can see, the price has been dropping so rapidly. It has dropped Rm 1.80 today.

This let me to believe there is a supper hand helping me. The Christens believes GOD works in mysterious ways to help those kind hearted who needed help.

Why the price is plunging?

According to the company’s last profit announcement, the company will not be able to make more money this year than last year. The company has to shut down the refinery for about 2 months for upgrading. Moreover, crude oil is going up in price. These are the reasons for the price to drop so rapidly. Fortunately, we sold almost all our holdings.

My share selection principle

Among all the criteria for share selection, the most powerful catalyst to move share price is profit growth prospect. Never buy any share which does not have this quality. You must sell as soon as you see that the company cannot make more money in the current year than last year.

Rich value investors like Warren Buffet are looking to buy shares selling below NTA, net tangible asset value. Currently there are many property counters selling below their NTA. Although it is very safe to buy them, but you have to wait many years for the companies to sell all their unsold properties to show increasing profit.

EPF and some insurance companies are look for high dividend yield. All these financial institutions with a lot of cash money are buying high yield stocks to earn more money than putting their money in fix deposit with the banks.

Some investors are looking for stocks with low P/E ratio. Since most share prices often fluctuate, they believe the shares with low P/E will eventually sell at higher P/E. For example, Hengyuan which has reported reduced profit. But basing on its latest earning is still selling at single digit P/E ratio. Low P/E does not mean the price should go higher. Profit growth prospect is still the most important consideration.

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