I am very happy to be invited to give this investment talk. I am not a professional and after seeing so many professionals in the audience, I feel so humble. Please do not hesitate to point out my mistake so that we can discuss logically to reach an acceptable agreement.
1. to make money from the stock market, you must know how to select good shares to buy.
2. you must know when to sell
3. to maximise your profit you must know how to control your emotion of fear and greed.
Among all the criteria such as NTA, dividend yield, healthy accounts, cash flow, EPS etc profit growth prospect is the most powerful catalyst to move share price. When you buy any stock, you expect to make money from dividend yield and share price increase. Almost all the Malaysian companies pay out very poor dividends. As a result, investors always look at the company’s profit growth.
Koon’s golden rule for share selection:
The company must report 2 consecutive quarters of increasing profit and the share is be selling at below P/E 10. For example
PCCS reported EPS of 1.45, 2.17 and 3.57 sen per share in the last 3 quarters and the last traded price was 60 sen.
Teo Seng reported EPS of 2.34, 5.76 and 7.37 sen per share in the last 3 quarters and the last traded price was Rm 1.24.
How I applied my golden rule to make a lot of money?
I have been using my share selection golden rule successfully to buy the following stocks:
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.
When to sell?
You must remember that every share cannot continuously go up or drop for whatever reason. After sometime, it will correct its moving trend. However, you must remember that if the company has very strong earning potential, the price will soon go up higher and higher again. You can sell some during price correction so that you have funds to buy back at lower prices.
You must bear in mind that some products or services are affected by season. For example, more eggs are sold during festive days.
Another example, Dayang’s service is affected during monsoon period 1st quarter of the year. Unfortunately, many shareholders dumped their holdings as soon as they saw Dayang reported a small loss in the last quarter. Fortunately, it has been going up in the last few days. It shot up 8 sen yesterday, 7 July 2019.
Control of emotion:
When you buy any stock, you expect to gain from its dividend and share price increase. Almost all the Malaysian listed companies pay out poor dividend. You must always aim for share price increase.
Some people cannot control their fear to buy any good stock which complies with my golden rule for share selection. They prefer to buy very safe stocks like Public Bank which give out about 4% a year.
Some investors are very greedy. They often fall in love with their purchases and they would not sell any of their holdings even it has shot through the roof. As I said before, no share can continuously go up. Unless you sell you cannot make money and you do not have funds to buy back at cheaper prices.