Uncategorized

Investment Psychology is Indispensable

 

Human psychology plays an important role in how individuals make investment decisions.

The reason why I am writing this piece is because many people asked for my advice after they have seen the profit announcements of Carimin and Dayang. Carimin reported a reduced profit but Dayang reported a very much improved profit.

After I posted my article “Dayang will fly on Monday”, many people asked me why I did not recommend this stock before the company’s announcement of its 4th quarter EPS of 10.13 sen, but I posted a few articles on Carimin.

You can see on the i3investor forum, many people thank me for giving them “Ang Pow” for the Chinese New Year because Cariminwas shooting up like rocket. Its 1st quarter EPS was 5.01 sen. After its 2nd quarter EPS of 2.13 sen announcement, many people are so worried especially those who have bought it at its peak.

Many people asked me what they should do. Since its 2nd quarter announcement its share price has been dropping. I cannot tell them to sell because it may climb up again especially when it announces improved profit in the next quarter. It also depends on the price they paid for their shares.

The reason why I dare not recommend Dayang before its 4th quarter result announcement simply because its previous few quarter earnings were quite poor. In fact,its balance sheet is horrible. An accountant friend told me that Dayang has defaulted on its long term loans already. Its current assets isRm 500 million versus Rm 1,300 million current liabilities, technically bankrupt.

But I dare to buy Dayang because it is in the same kind of business as Carimin. In fact, it has a much larger maintenance contract from   Petronas. Moreover, I sold a large portion of my Carimin to buy Dayang because it has gone up more than 300% within 3 months. You may say that I use cheap money to buy Dayang as I believe Dayang will soon play catch up.

Mental emotion control

To be really successful in equity investment, you must be able to control your mentalemotion of greed. When Carimin has good up more than 300% within such a short time, you must be able to decide to sell because no share can go up or come down continuously for whatever reason. After some time, it must correct.

After having said that you must not sell tooearly. I am sure some shareholders must have sold when it went up 100%, some sold when it went up 200% and some sold when it went up 300%. Those who sold too early, would not dare to admit their mistake to buy back and miss a good chance to make profit.  

More useful information for serious investors

By the way, I must tell you some good news. Yesterday DJI went up 181 points and crossed 200 day SMA and likewise for S&P 500 and Nasdaq. This confirmed US stock market is a bull market now. DOW’s 9 week winning streak is the longest in 24 years. I believe our stock market will follow the US and will be bullish after a major correction in 2018.

The oil price rally shows no sign of stopping. Brent crude oil price  closed at US$ 66.9 per barrel. This good news is good for all Oil and Gas stocks listed in KLSE.

Investment Bloggers Day

I wish to invite readers to attend my talk at 12-12.45 pm on 2nd March at the Boulevard Hotel, Midvalley, KL. I requested to talk later in the morning because I have to travel from Ipoh.

 

Most Popular

To Top