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Steel companies will show reduced profit in the last quarter: how do you react?

As soon as Pakatan Harapan won in the last general election to form the new Government, PM Tun Dr Mahathir said that he would review all the large contracts awarded by the former BN government. All the contracts awarded without open competitive tender and contracts which are not necessary will likely be terminated. Those As a result, almost all the share prices of construction contracting companies have plunged severely and rapidly.

As you can see from the IJM and Gamuda price charts below that the share prices of the 2 leading contracting companies have plunged by more than 30% because some shareholders are fearful that some of their contract works might be cancelled. So, they dumped their holdings.

As soon as contractors expected some of their contracts will be terminated, they stop buying construction materials including steel. As a result, all the steel manufacturers such as Lion Industries, Ma Steel and Southern Steel will likely report reduced profit in their last quarter.

Southern Steel has just reported its 4th quarter result which showed reduced profit in the 4th quarter as compared with each of its last 3 quarters. But it is much better than its previous year.

There are basically 3 distinct types of investors namely the perpetual losers, day traders, mostly normal investors and a few super investors who make the most profit. You must examine your track record to see which type of investors you really are. How do you react? It is a good test for you.

The perpetual losers are day traders who often buy and sell, will not hesitate to sell as soon as they see reduced profit announcement without 2nd thought.

The normal average investors will not sell immediately. But they would think about the future profit growth prospect and the type of business of the companies.

The super investors would think about the future profit growth prospect. If they are convinced that the companies have good profit growth, they would take the opportunity to buy when the share prices are so depressed.

Will you buy when Lion Industries is under price correction?

Which type of investor are you?

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The above is Lion Industries price chart

 

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