My Share Selection Golden Rule

As you know, there are many share selection criteria such as P/E ratio, NTA, return of equity, cash flow etc. All the professional fund managers and analysts are following these criteria. As a result, with due respect, most of them cannot beat the stock index. That is what the statistics show and it is not my imagination.

After more than 50 years of experience in share investment, I only have one golden rule in share selection. I must be 100% sure that the company must be able to make more profit in the current year than last year because when the company announces its annual profit, the share price will move up if the profit is better than that of last year and it will come down if the profit is reduced.

As you know all Malaysian public listed companies have to announce their quarterly results within 2 months of the end of their financial quarters. From their quarterly results, you can easily select the companies which are showing better profit growth prospect.

[ Visit The Coffee Break -The top newsletter to know more and learn more. Be smarter in 3 minutes ]

To illustrate this important stock selection rule, let me use Latitude Tree as an example. Please bear in mind that I am a substantial shareholder of Latitude Tree and I do not need you to buy it to help me get richer.

Unfortunately in this forum there are a few stupid readers who will make abusive and senseless comments for whatever I write. Fortunately most of the readers are sensible and smart people who often express their appreciation of my contribution.

Latitude has 3 factories in Johore, 3 factories in Vietnam and one factory in Thailand. The company employs more than 10,000 workers and 100% of its production is sold overseas in US$.

The company’s profit for last year ending June 2014, was 57 sen per share.

Its 1st quarter ending September 2014 its EPS was 17 sen and in the 2nd quarter ending December 2014 its EPS was 28 sen. The sudden jump in profit was partly due to our Ringgit weakness, lowest in 5 years in comparison with US$. The 1st half year EPS is 45 sen and I believe its 2nd half year EPS will be equal or better than the 1st half year in view of our continued Ringgit weakness and its continuous improvement of its products and management. What will be its EPS for the whole year?

I was invited to talk at KL Calgary Hall on 18th Dec last year and in my talk I used Latitude as an example to explain my investment method. I must take this opportunity to thank Mr Ooi Teik Bee who assisted me with his charts. I recommend Latitude when it was selling about Rm 3.50. Many attendees who bought Latitude wrote to thank me for my recommendation.

The price chart shows that it has gone up from Rm 1.00 to the current price of Rm 6.21 in the last 20 months. If you decide to buy Latitude, you are doing it at your own risk.

Most Popular

To Top