My biggest mistake in not selling --- Koon Yew Yin

My biggest mistake in not selling

 

As I said before, no share can go up or go down indefinitely for whatever reason. When it is up, you must sell some so that you have money to buy when it is down. My biggest mistake is that I fell in love with my shares so much that I did not sell when they were at their peak.

 

EGO: Ego is the root of my problem. I am so proud to have found shares that went up a few hundred per cent within a couple of years and if I sold them, I have less shares to boast.

 

GREED: Another problem I have is greed, which is one of the deadly sins. It can be a virtue or a vice. In the stock market, it encourages investors to work harder to find good stocks to buy and continue to buy but then we forget about selling. That is often one of my biggest mistakes.

 

From the several articles I have written and published, you would know that I have discovered Latitude, VS, Lii Hen and a few other stocks which have gone up a few hundred per cent in the last couple of years. But my big mistake is that I always find difficulty in selling. I fall in love with my discoveries and I did not sell more when their prices were peaking.

 

A few days ago I posted an article with the title “ Export manufacturers share prices dropped too much” where I said that due to the 3.5% strengthening of our Ringgit their share prices dropped too much. Most investors overreact to good or bad news.

 

The MYR per USD chart shows the average rate for the last 3 months was Rm 4.30 to one USD and the rate on 5th . Feb 2016 was Rm 4.15 to one USD, a 15 sen or 3.5% drop. Smart investors should be able to see that this 3.5% strengthening of our Ringgit should not cause the export manufacturers share prices to drop more about 20%. For example:

 

VS dropped from Rm 1.68 to Rm 1.32 a drop of 21%. Note 1st Q eps was 5.22 sen.

 

Focus Lumber dropped from Rm 3.02 to Rm 2.28 a drop of 25%.Note EPS for last 3 Q was 3.22, 7.8 and 9.35 sen respectively. It has no borrowing. Some of its cash saving is in US$.

 

Chin Well dropped from Rm 2.28 to Rm 1.84 a drop of 19%. Note 1st Q EPS was 6.07 sen.

 

Latitude dropped from Rm 8.05 to Rm 6.63, a drop of 18%. Note 1st Q EPS 28.95 sen. It has about Rm 200 million cash saving and some portion is in US$ deposit.

 

Lii Hen dropped from Rm 2.97 to Rm 2.35, a drop of 21%. Note EPS for last 3 Q were 6, 7, and 8.6 sen. It is cash rich and no borrowing.

 

If I had sold more when their prices were at or near their top, I would have a lot more cash to buy back when they subsequently dropped so much.

 

Last night, on Chinese New Year eve, Ooi Teik Bee rang me to seek my opinion regarding the strengthening of our Ringgit. He said that he has spoken to a highly respected investor who said that due to the bad publicity of our political situation, he thinks that our Ringgit will continue to be weak which is good for exporters.

 

I also agree that our Ringgit will continue to be weak and I foresee more foreign funds will come back to take advantage of our weak Ringgit.

 

Most investors have difficulty in selling. As I have learned a humble lesson in not selling, I hope this article will help you improve your investing skill to make more money.

 

I wish you a happy and prosperous Chines New Year.

KOON YEW YIN ------ GOOD BUYING OPPORTUNITY

3SHARES

 

 

 

 

 

COMMENTS

If you watch CNBC you will see Cramer shouting the market down. He is like a preacher telling you that it is a sin to hold shares.

Cramer: Charts show huge sell-off could be coming

Since investors always follow the US Market, all the major stock markets in the world are falling. Most investors and fund managers are rushing to sell all their holdings as if tomorrow is too late to sell. All Fund managers will follow one another like in a herd of sheep. No one dares to take a contrarian view as there is safety in numbers.

If all investors can control their emotion of fear and think logically, all the shares will be fully valued and then there will not be any undervalue shares for you to buy. Now you can buy many good stocks at a discount. I think the following shares are good stocks to buy.

If you want to be a super investor, you must take advantage of this buying opportunity.

	Favco	Canone	Chinwell	Focus Lumber	VS	Thong Guan
3rd last Q	10.34c	9.88c	3.94c	3.22c	2.58c	4.4c
2nd last Q	7.61c	14.77c	4.41c	7.80c	4.79c	6.75c
Last Quarter	14.27c	14.28c	6.07c	9.35c	5.22c	10.7c
Next Q	??	??	??	??	??	??
Current Price	2.75	4.06	1.82	2.40	1.31	2.90

FAVCO

This company has strong capabilities of producing cranes that served 11 of the world 13 tallest buildings including Burj Dubai, Taipei 101 and Petronas Twin Towers. Their specialty is construction of “high speed high lift” tower cranes that move heavy things up and down fast. It also has strong branding and collaboration with partner like Caterpillar (the world’s biggest construction machine manufacturer) for its crawler crane. Last but not least, it is a cash rich company with a net cash position of RM1.15 per share. Some might argue that they involve in oil and gas sector which is very much depressed now. One who invests in this company is for its capabilities, know-how and strong balance sheet. It is a wiser bet to invest in Favco compared to other oil and gas companies as they will be in huge trouble if low oil price prolonged due to huge debt.

CANONE

Canone involves in cans manufacturing business and production of sweetened condensed milk and evaporated milk. Commodity price like milk has come down substantially which benefiting F&B players like Canone. This is evidenced from Nestle, F&N, Dutch Lady and Canone’s latest quarter result showing reduced cost in and hence higher profit. As at today, milk price is still very much depressed. Canone also owns 32.9% of Kian Joo Can Factory Berhad. At its market price today, the stake is worth RM463mil which is half of Canone’s market cap.

CHIN WELL

This company manufactures and trades fastening and wire products. Together with the sister companies Gem Year Industry Co. Ltd in China and Jinn Her Enterprise in Taiwan (each managing by a brother), they are one of the biggest group of fastener manufacturers in the world, if not the biggest.

Chin Well is the beneficiary of implementation of GST as GST charging 6% while previously sales tax charging 10%. There were a lot cheap products from China selling without invoice to avoid sales tax. With the implementation of GST, they need to issue invoice which will push the prices up by 6%. European Union imposed anti-dumping duty as high as 74% tariff on imports of certain steel fastener from China and Malaysia. There are 9 companies being exempted from this rule and Chin Well is one of them. This anti-dumping duty has been extended for a further 5 years from 2015.

In February 2015, Chin Well acquired the remaining 40% shares in its Vietnam subsidiary and now they are able to fully consolidate the contribution from Vietnam. Vietnam has slowly becoming the preferred manufacturing hub due to its lower labour cost compared to China. Chin Well’s Vietnam operation is focusing on European’s DIY market which command higher margin. Chin Well exports 67% of its product hence they benefit from weak ringgit.

FOCUS LUMBER

Focus Lumber manufactures plywood and veneers. It exports 97% of its products and mainly to USA. It is a zero debt company with huge cash pile of 83 cents per share. Its profitability has improved for the past few quarters due to the fact that Ringgit has weakened significantly over the past few quarters. As low crude oil price leads to low gas price in US, people in US has more disposable income which leads to higher spending. Furniture players will benefit from this.

V.S INDUSTRIES

VS ranked 25 of the world top 50 electronic manufacturing companies in 2014. It is contract manufacturer of Keurig Green Mountain for its Keurig coffee machine, Dyson, sole OEM for Zodiac Pool Cleaners and etc. VS has operation in Malaysia, Indonesia, China, Vietnam and etc. 90% of the sales are transacted in USD and this accelerated earnings growth for the past few quarters.

The company was in talks with new clients in US and Europe and expect increasing export orders in 2016.

THONG GUAN

Thong Guan manufactures plastic and paper products like stretch films, garbage bags, flexible packaging and etc. It is one of the biggest players in Japan’s garbage bag market by having 15% market share. Thong Guan has been expanding all its production lines for the past 1 year and new capacity has brought in higher revenue and profit which evidenced in the past few quarters. There will be further new capacity coming in 2016 hence we can expect better performance for 2016.

RELATED ITEMS:

 

 

 

My Golden Rule for Share Selection - Koon Yew Yin

My Golden Rule for Share Selection - Koon Yew Yin

Author: Koon Yew Yin | Publish date: Mon, 30 Nov 2015, 09:45 AM

---

Many friends and acquaintances frequently ask me how I made so much money from the stock market. I have been using this golden rule for share selection:

The company must be able to make more money this year than last year by looking at its profit for the last few quarters and provided it is still selling at a reasonable P/E ratio. For most cases I consider P/E 10 is cheap enough or acceptable. But for leaders of the industries, I am willing to buy at a higher P/E ratio.

I need only to wait for the next quarter profit announcement to see the share price go up because an increased profit announcement is the most powerful catalyst to move share price. When the company announces its annual result of an increased profit, the share price will surely go up because most clever investors who are watching for quarterly announcement, will rush to buy the share.

The following shares comply with my share selection golden rule.
Can One 1st Q. 10 sen, 2nd Q. 14.77 and 3 rd Q. 14.28 EPS selling at Rm 4.35
Focus Lumber 1^st Q. 3.22 sen, 2^nd Q. 7.80, 3^rd Q. 9.35 EPS selling at Rm 2.90,
Thong Guan 1^st Q 4.4 sen 2^nd Q 6.75 , 3^rd Q 10.70 sen EPS, selling Rm 2.65
Mieco Chipboard 1^st Q 1.53, 2ndQ 3.21, 3^rd Q 2.94 sen EPS, selling Rm 1.10

Many readers frequently complain that I only recommend shares when they have already gone up in price and I wanted to sell so that they can buy. As you know I have been recommending Latitude, Lii Hen and VS for a long time when their prices were much lower but all my critics did not buy. Those who have bought are laughing to the bank.

Now the prices of Latitude, Lii Hen and VS have all gone up a few 100% within 1 or 2 years, nevertheless, they still comply with my golden rule. I believe their prices will continue to climb. You can verify what I said above by looking at their EPS for the last few quarters in Bursa Malaysia.

On the last trading day 28^th Nov. 2015, both Latitude and MPI reported about 29 sen per share and both their share prices went up about 30 sen each.

If you are not a novice, you should use margin finance to leverage your profit. As long as you are confident to make more than the 4.8% pa interest rate, you can make more money with margin finance.

I hope some readers will find some new shares which comply with my golden rule and post their findings here for the benefit of all readers.

My intention of posting this article is to teach people how to make more money from the stock market. Unfortunately, there are a few habitual critics who want readers to think that they are clever in making stupid comments. They must realise that most readers can see how stupid they really are and appreciate my writings.
  
As I have a lot of the shares I mentioned above, I am not asking you to buy any of them but if you decide to buy, you are doing it at your own risk.

How can I make so much money from the stock market? Koon Yew Yin

How can I make so much money from the stock market? Koon Yew Yin

Author: Koon Yew Yin | Publish date: Wed, 7 Oct 2015, 12:03 PM

---

Since the publication of my Rm 50 million donation to the Penang State Government to build student hostels to help the poor students, many people wrote or telephoned to ask for financial help and many wanted to know how I managed to make so much money from the stock market to help the poor students. They all want to know my secret formula.

After I read investment books by Warren Buffet, Benjamin Graham, Peter Lynch and other investment gurus and with my 32 years of experience, I have formulated a simple way to select shares that I am sure of making money. I cannot lose money if I buy shares following my simple golden rule.

My golden rule for share selection:

It is that the company whose share I want to buy must be able to make more profit this year than last year because when it announces its annual increased profit, the share price will surely go up. By looking at the last few quarterly results, I can estimate whether the company can make more profit this year than last year.

I am only willing to buy the share if it is selling at a P/E of less than 10. I may buy it at a higher P/E if the company is the famous or leader of its industrial group and many financial institutions are holding the share.

There are many share selection criteria such as NTA, Cash flow, return of equity etc. I consider the earning per share (EPS) is the most important. It is the most powerful catalyst to move share price. When its EPS goes up the share price will also go up.

For a start, you must think like a businessman. Since the value of our Ringgit is dropping, I want to find export manufacturers that sell their products in US$. I do not think like an accountant, worrying about cash flow, too much borrowing etc. As a businessman, I know you need more loan to do more business and it takes time to manufacture the products and it takes time to deliver the products.

Moreover, most buyers will not pay cash. They want delay payment of 60-90 days. As a result, the company account will show increased borrowing and poor cash flow.
 
How to use margin finance?
I also use margin finance to buy more shares to make more profit. As my shares go up in price, I can increase my borrowing to buy more shares. I dare to use margin finance because I am confident that I can make more than the interest of 4.8% pa I need to pay.

When to sell?
I will only sell any of my holdings when I am not sure that it can make more profit this year than last year. If I am sure it can make more profit this year than last year, I will not sell because I am sure its price will go up when it announces increased profit.

NOTE: Readers must check all their holdings to make sure that the companies can make more profit this year than last year.

Advertisement: Replay Ad

Ads by ZINC