(This post was originally published at klse.i3investor.com)
Investment success and human psychology are inseparable. After having read hundreds of commentaries of the articles I posted on this forum, I have a better understanding of human behavior. To illustrate the point I am making, allow me to quote a few relevant verses of the Christian bible.
The bible John 8:32 quote “You will know the truth and the truth will set you free” unquote. In the few days as the price of Jaya Tiasa was moving up, I notice the number of ‘Doubting Thomas’ was also reducing. I refer to those disbelievers.
A doubting Thomas is a skeptic who refuses to believe without direct personal experience—a reference to the Apostle Thomas, who refused to believe that the resurrected Jesus had appeared to the eleven other apostles, until he could see and feel the wounds received by Jesus on the cross. I refer to those disbelievers with strong opposing view.
Luke 23:34 quote “Father forgive them for they know not what they do” unquote. I refer to those who ridiculed me with abusive language.
I will take this opportunity to answer some of the questions:
1. Why should I buy Jaya Tiasa when it is selling P/E 87 while KLK P/E 27, SOP 20, TSH 30, United Malacca 20, Utd. Plant 16 ?
The superior performances of all these companies have been reflected in their share prices already and they are famous and no longer cheap. The price of JT has been depressed for a long time because the average age of their palms is only 5.6 years is currently showing poor earnings. Bearing in mind oil palm production peaks at the age of 11 years, JT has a far better profit growth prospect than the others which is the most important criterion for share selection.
2. Ta Ann is selling cheaper at P/E 26?
My short answer is to look at the following charts and use your imagination to figure out why JT is a better buy.
3. How can you use margin finance safely and avoid Margin Call?
As you know the interest rate for margin loan is only 4.6% pa. To be safe is to buy a share like JT which has a profit growth rate of more than 4.6 %. As long as I am sure that the share can produce more profit than 4.6% pa, I am safe.
To avoid margin call is to use about 70% of the margin and when you feel more confident of the shares you own and general market trend, you can take a little more risk by using more margin.
4. As all shares fluctuate in price, how do you take advantage of this phenomenon?
You must bear in mind that all share prices cannot go up or go down indefinitely for whatever reason. When the price is down, use margin finance to buy more shares and when the price has gone up, sell those shares which were bought with margin loan. With some practice, you can improve your technique in your buying and selling to maximize profit.
5. Jaya Tiasa has too much loan?
It is a good sign as long as the loan is properly use to expand its business. When companies are holding huge amount of cash in fix deposit, it only shows that the management cannot use the cash to generate more profit than the fix deposit rate of 3%.
6. Why don’t I buy shares which are always selling at low P/E ratio and high dividend yield?
Hexza and Symphony Life are 2 good examples. Their shares have been selling at low P/E and high yield for many years. The reason is that they do not have profit growth. Their profit remained the same for many years. Some people will buy these type of shares for their high dividend yield but my aim is different. I want to make money faster.
Note: Jaya Tiasa is my major holding and I am not asking you to buy. Since the start of 2014 it has performed better than the KLCI which indicates that more investors are interested to buy it.
I have organized a talk at 11am on 16th Feb, Sunday at the Club House, Meru Golf Resort, Jelapang, 30020 Ipoh. Those who are interested please email to tell me the number of people who will be coming so that I can arrange a good lunch for you all. My email address: [email protected].