Tips on Investing in Bursa Malaysia
Most of the peoples I surveyed losing money in trading or investing in Bursa Stocks Exchange Market. Investing in Kuala Lumpur Bursa Stocks Exchange will never be rewarding if you do not follow the some basic investing rules. I would like to share my two cents view on how to make money from Bursa Stock Exchange: -
1. Invest only in companies which consistently make considerable
profit through out many years after listed.
You should only invest on those companies consistently make profit through out many years. For my own guide lines, it should be at least 5 years after listed. By observing this rule, you are able to make sure yourself that you only invest in the companies which the management are capable to manage the companies well and consistently making profit for the companies and the shareholder like you. More importantly, you will prevent yourself to buy the companies who the management or big boss only interested to make money from Initial Public Offering and runaway after cheated investors money. Thus, new IPO stocks will never be in my portfolio so far. My golden rule to myself, although making profit is my high priority, prevent making loss is even higher. Thus, I will never consider new IPO stocks or any stocks without make considerable and remarkable profit over the past 5 years.
2. Invest in the people, not only the company.
Before I invest, I will ask this question, who own this company? Who manage the company is this person capable? Is this person trusted? Is this person managing the company well? What is his past record of managing the companies? For example, I have known that Tan Sri Teh Hong Piow is really a capable person by knowing his style, his management skill and more importantly, his integrity. I have studied the performance of his public bank for many years and concluded that he is really a genius to manage the bank. Thus, when his stock London Pacific Industries being listed, I will not give second thoughts before I invest in London Pacific Capital by trusting Tan Sri Teh. Ask yourself, if your got money and you want to invest in business, will you join venture with your friends who have cheated you before, or who have cheated many peoples before, you should know his character since he is your friend. However, if you know the person well, who is capable and honest, I believe you will feel more comfortable and secure by joint venture with him. Likewise to the stocks market, you should never invest in the stocks that you don’t know the management or the boss well, who may eventually collapse the companies and cheat all your money away. A good examples for capable and honest person like Tan Sri Dato' Lee Shin Cheng(IOI, IOI Property) and Robert Kuok Hock Nien ( PPB, PPB Oil, etc) . DiGi CEO Morten Lundal (DIGI) is really another genius I knew. For all the foreign owned companies like Nestle, Dutch lady, BAT, MOX, Shell, etc, they are manage by good management with good company culture, and you can be assured that your money invested are really go to the business and eventually will make money for you. For local companies, you shall be more selective and careful, and make sure you choose the right company with capable person, and more importantly, honest person who will not eat your money.
3. Invest in companies which the nature of business will never losing money or the chance of losing money is very slim.
Where got companies never losing money? Hur....to answer this question, I think I can name a few. For example, Bursa is one of them. Bursa earns money by earning commissions from you when you trade stocks. The more you trade the more Bursa earn. The less you trade the less Bursa earn. Their overhead and expanses are low and their business model is simple. It is a matter of low profit or high profit and the risk of losing money is minimal. If some play contra and suffer huge loss and runaway to Thailand, who bear the loss? Securities firm and the remisier, not Bursa. Thus, you should choose Bursa instead of any securities firm. Another good example is Nestle, you drink MILO, your children will drinks MILO, your children's children will drink MILO, and so what is your worry? If you think investing in those companies will never make significant profit, then I will prove you wrong. One of my favorite stocks Dutch Lady has gone up more than 200% after I bought it, and I still hold it, and I still believe it will consistently make profit and give high dividend! Thus, I have give you the principle here, you got to do your homework to find which companies business model is so simple that will sure make profit ! 3. Invest in companies really pay out the dividend. The principle is simple, what showed in the financial report may not be the real money, only those companies capable to pay it out is real money. I don want to discuss more on this too simple logic. You can find the high yield stocks easily in Bursa market.
4. Invest in big capital stocks or small capital who owned by the big capital stocks.
Based on the past records, most of the companies suffer huge loss are from small capital of main board, second board and mesdaq. Thus, you should avoid these stocks. If you really want to invest in these stocks which may give you quick profit with up down 20 or 30%, then you should only considered any of these stocks are owned by Good Big capital or my principle 2, owned by good and honest and capable person.
5. If the companies consistently doing well for many quarters and make remarkable and impressive profit, even though the share price is up, it is still cheap.
If the companies consistently doing badly and suffer loss, even the share price is go down a lot, it is still expensive. Thus, do not hesitate to invest in the companies which consistently doing well, even it is high price, but is it still worth it. Unless you are very sure what happen, do not buy any limit down stocks.
6. Do not invest in High Debt or High Gearing Stocks
Check the balance sheet, the debt of the company should not be more moderate for none establish business or any local companies. However, exception is given to the establish companies like BAT or Nestle, or any foreign owned company as their objectives of the high debt is mainly improve the Return On Equity. For local companies, you must be careful and selective. Be cautious of any off balance debt statements.
7. Do not invest in outdated business.
What do I mean by outdated business ? For example, nowadays people start using digital camera, because of thechnology change, how is the conventional camera maker going to survive ? It includes also the fim manufacturer and related supporting business. Another example, when the electronic storage device 's price getting cheaper and cheaper, the outlook of the VCD/DVD manufacturer is getting dull. Be very cautious to invest in any technology companies, if another competitor have better technology, the company will lost their market share because of its outdated technology. Thus, try to avoiod this kind of companies unless you fully understand their business and their outlook. One of my favourite stocks in this sector is Uchitech. I leave it to you all to figure out why I have choose this company.
8. PE is less than ROE
Do not invest in stocks just based on the PE alone, low PE is good but sometimes it may mean that you are investing in business with low prospect. Grow business usually come with high PE. For my personal guideline, the PE can be moderate high, but must be equal or less than ROE. Thus, if ROE is high, I can accept the stocks with moderate high PE, of course, not to the extend of PE 100 or 1000. I will leave it to the investors to decide what is the moderate PE is.
9. Do not sell your stocks as long as it perform well and consistent exceed expectation significantly. Sell only when the price is rediculous high.
You friend startup a chicken rice restaurant but he runs out of capital. Thus, he ask you to invest. You agree and invest 10000 ringgit. After 6 months, his chicken rice store business is fantastically doing well and he start paying you earning 500 this month. One month, he pay you 1000 earning, and two months later, he pay you 1500, do you want to sell this restaurant if someone willing want to buy your share of this restaurant for 15,000 ? You will immediately get profit 5000, together with your total earning 3000 he pay you, your profit is so impresive , 8000, or 80% of your initial investment. However, there are no sign that the business will do poorly, and everytime you visit the restaurant, the business is too good that it almost full house everydays. Even if the restaurant can maintain the earning 1500 monthy for another 9 months, you will get 13,500 more and your total profit for the year is will also be 16,500. The return of equity is impressive of 165% , mean you earn 165% from your invested capital yearly. More importantly, your monthly earning may continue to grow ........like wise for stocks, if your stocks are perform so well that it consistently deliver excellent result meet and exceed your expectation, hold it...........don't sell it.........unless someone is crazy want to buy your restaurant shares at rediculous price......if an idiot likes the restaurant so much that he want to buy your shares for 200,000 or 500,00 , yes, you can sell it to him immediately.
Please refer to this link for further stock pick : http://mybursa.blogspot.com/
1. Invest only in companies which consistently make considerable
profit through out many years after listed.
You should only invest on those companies consistently make profit through out many years. For my own guide lines, it should be at least 5 years after listed. By observing this rule, you are able to make sure yourself that you only invest in the companies which the management are capable to manage the companies well and consistently making profit for the companies and the shareholder like you. More importantly, you will prevent yourself to buy the companies who the management or big boss only interested to make money from Initial Public Offering and runaway after cheated investors money. Thus, new IPO stocks will never be in my portfolio so far. My golden rule to myself, although making profit is my high priority, prevent making loss is even higher. Thus, I will never consider new IPO stocks or any stocks without make considerable and remarkable profit over the past 5 years.
2. Invest in the people, not only the company.
Before I invest, I will ask this question, who own this company? Who manage the company is this person capable? Is this person trusted? Is this person managing the company well? What is his past record of managing the companies? For example, I have known that Tan Sri Teh Hong Piow is really a capable person by knowing his style, his management skill and more importantly, his integrity. I have studied the performance of his public bank for many years and concluded that he is really a genius to manage the bank. Thus, when his stock London Pacific Industries being listed, I will not give second thoughts before I invest in London Pacific Capital by trusting Tan Sri Teh. Ask yourself, if your got money and you want to invest in business, will you join venture with your friends who have cheated you before, or who have cheated many peoples before, you should know his character since he is your friend. However, if you know the person well, who is capable and honest, I believe you will feel more comfortable and secure by joint venture with him. Likewise to the stocks market, you should never invest in the stocks that you don’t know the management or the boss well, who may eventually collapse the companies and cheat all your money away. A good examples for capable and honest person like Tan Sri Dato' Lee Shin Cheng(IOI, IOI Property) and Robert Kuok Hock Nien ( PPB, PPB Oil, etc) . DiGi CEO Morten Lundal (DIGI) is really another genius I knew. For all the foreign owned companies like Nestle, Dutch lady, BAT, MOX, Shell, etc, they are manage by good management with good company culture, and you can be assured that your money invested are really go to the business and eventually will make money for you. For local companies, you shall be more selective and careful, and make sure you choose the right company with capable person, and more importantly, honest person who will not eat your money.
3. Invest in companies which the nature of business will never losing money or the chance of losing money is very slim.
Where got companies never losing money? Hur....to answer this question, I think I can name a few. For example, Bursa is one of them. Bursa earns money by earning commissions from you when you trade stocks. The more you trade the more Bursa earn. The less you trade the less Bursa earn. Their overhead and expanses are low and their business model is simple. It is a matter of low profit or high profit and the risk of losing money is minimal. If some play contra and suffer huge loss and runaway to Thailand, who bear the loss? Securities firm and the remisier, not Bursa. Thus, you should choose Bursa instead of any securities firm. Another good example is Nestle, you drink MILO, your children will drinks MILO, your children's children will drink MILO, and so what is your worry? If you think investing in those companies will never make significant profit, then I will prove you wrong. One of my favorite stocks Dutch Lady has gone up more than 200% after I bought it, and I still hold it, and I still believe it will consistently make profit and give high dividend! Thus, I have give you the principle here, you got to do your homework to find which companies business model is so simple that will sure make profit ! 3. Invest in companies really pay out the dividend. The principle is simple, what showed in the financial report may not be the real money, only those companies capable to pay it out is real money. I don want to discuss more on this too simple logic. You can find the high yield stocks easily in Bursa market.
4. Invest in big capital stocks or small capital who owned by the big capital stocks.
Based on the past records, most of the companies suffer huge loss are from small capital of main board, second board and mesdaq. Thus, you should avoid these stocks. If you really want to invest in these stocks which may give you quick profit with up down 20 or 30%, then you should only considered any of these stocks are owned by Good Big capital or my principle 2, owned by good and honest and capable person.
5. If the companies consistently doing well for many quarters and make remarkable and impressive profit, even though the share price is up, it is still cheap.
If the companies consistently doing badly and suffer loss, even the share price is go down a lot, it is still expensive. Thus, do not hesitate to invest in the companies which consistently doing well, even it is high price, but is it still worth it. Unless you are very sure what happen, do not buy any limit down stocks.
6. Do not invest in High Debt or High Gearing Stocks
Check the balance sheet, the debt of the company should not be more moderate for none establish business or any local companies. However, exception is given to the establish companies like BAT or Nestle, or any foreign owned company as their objectives of the high debt is mainly improve the Return On Equity. For local companies, you must be careful and selective. Be cautious of any off balance debt statements.
7. Do not invest in outdated business.
What do I mean by outdated business ? For example, nowadays people start using digital camera, because of thechnology change, how is the conventional camera maker going to survive ? It includes also the fim manufacturer and related supporting business. Another example, when the electronic storage device 's price getting cheaper and cheaper, the outlook of the VCD/DVD manufacturer is getting dull. Be very cautious to invest in any technology companies, if another competitor have better technology, the company will lost their market share because of its outdated technology. Thus, try to avoiod this kind of companies unless you fully understand their business and their outlook. One of my favourite stocks in this sector is Uchitech. I leave it to you all to figure out why I have choose this company.
8. PE is less than ROE
Do not invest in stocks just based on the PE alone, low PE is good but sometimes it may mean that you are investing in business with low prospect. Grow business usually come with high PE. For my personal guideline, the PE can be moderate high, but must be equal or less than ROE. Thus, if ROE is high, I can accept the stocks with moderate high PE, of course, not to the extend of PE 100 or 1000. I will leave it to the investors to decide what is the moderate PE is.
9. Do not sell your stocks as long as it perform well and consistent exceed expectation significantly. Sell only when the price is rediculous high.
You friend startup a chicken rice restaurant but he runs out of capital. Thus, he ask you to invest. You agree and invest 10000 ringgit. After 6 months, his chicken rice store business is fantastically doing well and he start paying you earning 500 this month. One month, he pay you 1000 earning, and two months later, he pay you 1500, do you want to sell this restaurant if someone willing want to buy your share of this restaurant for 15,000 ? You will immediately get profit 5000, together with your total earning 3000 he pay you, your profit is so impresive , 8000, or 80% of your initial investment. However, there are no sign that the business will do poorly, and everytime you visit the restaurant, the business is too good that it almost full house everydays. Even if the restaurant can maintain the earning 1500 monthy for another 9 months, you will get 13,500 more and your total profit for the year is will also be 16,500. The return of equity is impressive of 165% , mean you earn 165% from your invested capital yearly. More importantly, your monthly earning may continue to grow ........like wise for stocks, if your stocks are perform so well that it consistently deliver excellent result meet and exceed your expectation, hold it...........don't sell it.........unless someone is crazy want to buy your restaurant shares at rediculous price......if an idiot likes the restaurant so much that he want to buy your shares for 200,000 or 500,00 , yes, you can sell it to him immediately.
Please refer to this link for further stock pick : http://mybursa.blogspot.com/
posted by Smart Investor | 2:39 AM
