Investing

Lion Industry: how to recognise a growth stock early?

Although the title of this article reflects my egotistic manner and people do not like egoistic people, but it is ego that drives me to think and harder to make so many achievements. I was a co-founder of the 3 of the larger construction and property companies in Malaysia namely Mudajaya, Gamuda and IJM Corporation Bhd.

I am nearly 86 years old and I like to spread my accumulated knowledge to people, mush like a priest preaching the gospel. My intention is honourable.

My track record:

I am only a business man. As I am not an accountant, I can hardly understand a company’s balance sheet. I am also not a chartist. But then how could I buy so much of Latitude Tree, V S Industry and Lii Hen?

The above chart shows that Latitude went up from Rm 1.00 to Rm 8.00, an increase of 800 % within 2.5 years. Its 2015 annual report showed that I was the 4th largest shareholder holding 6.32 million shares.

 

The above chart shows V S Industry went up from 30 sen in June 2014 to Rm 1.70 in Dec 2016, an increase of 550 % within 18 months. Its 2015 annual report showed that I was the 2nd largest shareholder, holding 102 million shares.

The above chart shows that Lii Hen went up from 40 sen in mid 2013 to Rm 3.00 in Oct 2015, an increase of 750% within 2,5 years. Its 2015 annual report showed that I was the 2nd largest shareholder, holding 19.80 million shares.

My share selection golden rule:

As soon as I see any company with a good business reported 2 consecutive increasing quarterly profit and it is selling at P/E below 10, I will start to buy it. If it reports another quarter with increased profit, I will buy more aggressively.

For example, I started buying Lion Industry as soon as I saw 2 consecutive quarters with increased profit. That means I started buying when it was selling at about 70 sen per share.

Based on my buying method, I would be buying earlier than professional chartists who would only start to buy when the price passes its 70-day moving average, that is Rm 1.20 per share as shown by the price chart below, produced by the famous Mr Ooi Teik Bee.

With due respect, like all professional Mr Ooi’s method is very safe to make money.

When do I start to sell Lion Industry share?

Many day traders would sell as soon as they can make 30% profit. Assuming the bought it at 70 sen, they would start selling at about 90 sen. Statistics shows that day traders do not make much money because they sold too early and would not admit their mistake to buy back the share at higher prices. Most of them would like to boast to their friends that they have made 30% profit within 2 months of buying Lion Industry shares.

As long as Lion Industry continues to report increasing profit, I will not sell. In fact, I will buy more shares with margin loan.

I expect it will report increased profit before end of this month.

I will only start to sell when it starts to show reduced profit.

 

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