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kcchongnz blog

Author: kcchongnz   |   Latest post: Sat, 20 Jan 2018, 02:43 PM

 

Are you a super investor? kcchongnz

Author: kcchongnz   |  Publish date: Sat, 20 Jan 2018, 02:43 PM


Often in the internet space, we have read about some general classifications of equity investors;

  1. The “low-class investor” who did not buy a certain stock which its stock price has gone up, and more stupid because they did not buy when its share price continued to climb up.
  2. The average investors who have bought the shares at low price but have sold off to take profit when the share price has doubled, say.
  3. The “super investor” who “continued to buy using margin finance. As the price goes higher, they can borrow more to buy”.

When this type of article appeared in the public forum, especially the classification was made by well-known and respectable person in the society, again and again, what would the general public think, and what would be their choice?

The answer, of course is very clear. Who wants to be a “low-class” investor, or just an “average investor”? Everyone will want to be a “super investor”, won’t you?

Given the choices above, I would prefer to be an “average investor”. If I cannot be an “average investor”, I would take the “low-class investor” in precedence of the “super investor”.

Why do I take this stand? The answer is risk. When a share is being hyped up and touted relentlessly, and its share price gone up too fast too soon, without very strong justifications, it becomes risky.

Wonderful companies become risky when people overpay for them.” Peter Lynch

Let us use the share price movement of Hengyuan as an example.

 

Case Study: Hengyuan

Hengyuan is without doubt, the hottest stock in i3investor now. There are numerous articles written on it and published in i3investors, and a thread with the most comments. Some articles and comments are brilliant and filled with facts and detailed analysis, which investors should pay more attention to, but most are just pure hypes and touting of stock with little substance. Below is a typical one,

[Posted by John Lu 《 HIBISCUS 》 TP RM2 > Dec 29, 2017 06:42 AM | Report Abuse https://cdn1.i3investor.com/cm/icon/trans16.gif

Hengyuan haha...counting money everyday]

Figure 1 below shows the price movement of Hengyuan in the last few months. Its share price has gone up from about RM3.00 a year ago to more than RM19 three weeks ago. That was when the above comment was made. The share price stayed around RM17, before plunging below RM12 just a couple of days ago, and rising to close at RM14.30 yesterday on 19th January 2018.

Figure 1:

What an exciting ride! Some people do enjoy this type of thrill. Some got “frightened the shit out of” them.

An ordinary investor, or even a super investor would not have discovered Hengyuan a year ago when it was trading at RM3.00 as there was no positive results to show yet. Some might have discovered and started to invest say three months ago when it was trading at about RM8.00 and reported a good set of quarterly results. But does he who did not buy Hengyuan deserve to be classified as “low-class investor”?

I don’t think so. There are close to a thousand companies listed in Bursa. One really doesn’t need to know every stock in the stock exchange, and he just can’t spot every gem. There are also some other stocks which have gone up reasonably during the same period, and investors would have obtained reasonable return. Some shares might have gone up even more than Hengyuan during the same period.

For those “average investor” who have bought Hengyuan and sold off at about RM17 should be very happy to be an “average investor” too by making such a great return in such a short time. Why not? I would.

What about the “super investors” as categorised above?

 

Margin financing (for super investors)

There were indeed many new “super investors’ about a month ago when Hengyuan’s share price continues to rise to about RM14. They started buying at around that price, and “continued to buy using margin finance. As the price goes higher, they can borrow more to buy”.

Looking at the share price movement of Hengyuan recently as shown in Figure 1 above, the average price of buying may be around RM17.00. The volume of trading spiked, with the above “good” advice of using other people’s money (OPM). This was also evidenced from the sources in the market that there was huge increase in margin financing for Hengyuan during that period.

About three weeks ago, the share price of Hengyuan started to fall from RM17.00 and plunged to less than RM12.00 a couple of days ago, with heavy volume. Those who bought Hengyuan during the peak of RM19.00 when it was hyped up and relentlessly touted, would have lost a whopping 37%. Even those who bought at an average of RM17 would have lost 30%, in less than three weeks. If one “continued to buy using margin finance. As the price goes higher, they can borrow more to buy”, say using 50% margin, they would have lost about 70%.

Did margin calls happen during the plunge? I am not sure, the volume was heavy during that period and my remisier told me “that kind of dumping is typical of margin calls or voluntary selling.” In a margin call, the investment banks will just dump your shares at whatever price, without getting approval, or even without informing you, to mitigate their potential losses.

Hengyuan share price recovered strongly yesterday in the latter part of the day. Those who were forced to sell due to margin calls, or forced to cut-loss have lost the opportunity to recover in this, maybe (and maybe not) a good share, for long-term investing.

Hengyuan’s recent case is just one example. I could give you scores of other examples in the past. That is why I never like to be the third category of investor, the “super investor” given above. Will you?

 

Conclusions

Investing is for building long-term wealth slowly but surely, with little risk. Chasing stocks which have gone up in price too fast too soon is one of the biggest risks in investing. What this gentleman below says is often true,

Leverage can magnify your gains in the stock market, but do not forget the other part of the story. Some people do make a lot of money using OPM, but many more, especially the newbies, without proper investment knowledge, the inexperienced, and try to get rich quick by mimicking the super investor, had lost hugely in the stock market too.

There are many people in the internet boasting their success in using OPM. However, you my not know what they had gone through, and you may not replicate their “success” following them.

 “The world is not dangerous because of those who do harm, but because of those who look at it without doing anything”. Albert Einstein

That is the motivation of this article

Happy investing.

 

KC Chong (ckc13invest@gmail.com)

  3 people like this.
 
John《 HIBISCUS 》 TP RM2 Wah...i m so famous now until kc copy my comment in this article....kc still stuggle at 9% return? I support your Dayang abit at 83c...hopes Dayang wont give me 9% only in 1 year
20/01/2018 14:55
probability Hmm..margin finance probably the cause..thanks for enlightening KC
20/01/2018 15:01
probability Im innocent investor..the worst category :(
20/01/2018 15:02
tecpower Bursa Malaysia to continue upward momentum next week
http://m.thesundaily.my/node/520299

Nasdaq and the US semiconductor index hit a historical high. Tech rally will be coming soon.
20/01/2018 15:03
Ricky Yeo John doesn't understand opportunity cost
20/01/2018 16:01
cyeec2000 Well said kc Chong..
20/01/2018 16:23
cheoky Malaysians are good result oriented instead of good process oriented. it will continue to be for foreseeable future until a crisis come. If uncle put off greatly this time, you need to work double work to educate Malaysian on this lo. but I wish uncle put it off lolx. vested interest ma. see Malaysian die hard. typical Malaysian ma. even my former rich boss told the short skirt insurance agent. Don't tell me 5 or 10 years returns. tell me how much can I make next year. Oh perhaps this is were intelligent investing strive...but still there is a high chance after 5 years absolute return of uncle equivalent is still higher compare to intelligent investing discounting risk adjusted parameters.
20/01/2018 16:54
John《 HIBISCUS 》 TP RM2 Ricky Yeo dare post comment but not dare participate in 2018 stock pick...lame like a chicken
20/01/2018 17:00
Ricky Yeo That's why I say you don't understand opportunity cost and market. You want to judge someone based on their performance. You don't know how to exercise independent thinking other than using number to judge someone's success
20/01/2018 19:06
tc2012 Those having margin call deserved it as they only learn to manage the upside and
neglected the downside risk.It is a good but painful lesson to learn.
20/01/2018 19:18
brightsmart bright and smart

raise the bar, aim high

to be super investor.
20/01/2018 19:58
gohkimhock Those who speculated in Bitcoin and Heng Yuan, should be prepared to lose half of your capital.
20/01/2018 22:05
myongcc5 I never missed KC artiles! Entertaining n Enlightening!
Simple but comprehensive!
well done
20/01/2018 22:15
myongcc5 KC, how is the weather there, very hot?
20/01/2018 22:16
kcchongnz Posted by John Lu 《 HIBISCUS 》 TP RM2 > Jan 20, 2018 05:00 PM | Report Abuse
Ricky Yeo dare post comment but not dare participate in 2018 stock pick...lame like a chicken


Don't participate in the stock pick means "lame like a chicken"?

Why? What is so great to participate in it? You do participate right? What is the positive contribution you have made in all your participation in the stock pick, which we can benefit?

Compared with the knowledge and wisdom of Ricky Yeo, where do you think you stand?
20/01/2018 22:46
kcchongnz Posted by myongcc5 > Jan 20, 2018 10:15 PM | Report Abuse
I never missed KC artiles! Entertaining n Enlightening!
Simple but comprehensive!
well done
KC, how is the weather there, very hot?

myongcc5, thank you very much for your support. That always makes me continue to write and share.

Weather in Auckland? it is at 21 degree Celsius now, fantastic.

A few days ago I was at a place with under zero degree, 15 degree yesterday, and now it is 26 degree, not too bad.
20/01/2018 23:10
myongcc5 Thanks Sifu KC fr reply n great contribution to Investment society!
PTL!
I already told my son, one day after his graduation, must take up course wth Sifu KC before start investing
20/01/2018 23:24
myongcc5 My group of investors always Praise U
20/01/2018 23:24
myongcc5 Gnite
20/01/2018 23:25

How to benefit from my stock pick service kcchongnz

Author: kcchongnz   |  Publish date: Sat, 13 Jan 2018, 10:29 PM


Dear stock pick participant,

There have been some confusions on the service provided in this stock pick service. The confusion arises as participants have been receiving, besides my specific stock picks, “My 2018 Bursa Stocks Portfolio”, many stock picks and reports by analysts and others. So which stock should look at?

The answer is, all of them, by using your own judgment and according to your own preference and personal investment risk profile, get some good investment ideas from all of them. The beauty is that all of you are either my past or present online investment course participants, you are able to utilize on what you have learned in the course to make informed judgment. You have been taught how to fish, as well as given some fish to eat. How nice!

I hope with this message below, you would be able to clear the confusion and decide for your own good; what to look for, and also what and why it may be wise for you pay attention to this service you are in so that you can fully benefit from the service.

When I started my original stock pick service, I only provided stocks selected by me with detail analysis, valuations, and comprehensive reports sent to participants over a period of one year. All the participants got are just 10-15 stocks to consider to invest over a period of time. I must say here that these services performed very well.

The first stock pick service started in April 2016 and ended 15th July 2017 with a total of 12 stocks given over the duration of the service. The portfolio of stocks had an average return of 36%, 5 times higher than the return of just 7.6% of KLCI, or 4 times the broader FBM Emas Index of 9.5% over the same one-year period. There were nine winners, some with big gains but only three losers, with minor losses. This was detailed in my article, Three years” and investing 李香兰三 in i3investor in the link below,

https://klse.i3investor.com/blogs/kcchongnz/127935.jsp

The second stock pick service started on 12th November 2016 and ended exactly one year later on 11th November 2017.

The portfolio of 13 stocks made a commendable average as well as median return of 24% and 40% respectively, 3 times the gain of 8.9% of the broad KLCI index. The portfolio also more than doubled the return of the broader Mid-cap FBM Emas Index of 11.4%. There were only three losers, with minimal losses. This was detailed in my review here,

https://klse.i3investor.com/blogs/kcchongnz/137874.jsp

That is the very essence of FVI, low risk and potentially high return, even in the shorter term.

My two stock picks services above came with detail analysis on the business and its performance and various valuation techniques. Participants were able to follow the whole process of stock selection, and selected those stocks which fit their own personal risk profile to invest in. This was particularly good for my past online course participants, who could also carry on revision or continuous learning about fundamental value investing. New participants could also learn more about FVI.

There were also periodic reviews of the stocks picked, for example, when their quarterly reports were published. This is to check there is any structural change in the business of the company and actions taken accordingly.

Watch lists of stocks following some fundamental value investing (FVI) strategies such as the Magic Formula, dividend yield, growth investing, value-on-the-move, asset-based investing, and various other investment strategies. These are proven successful strategies which would provide consistent results, at lower risk, over a longer-term horizon.

Participants were also continuously reinforced the FVI mindset with many valuable articles from me, from other FVI websites, as well as shared by other proven successful super FVI investors, with behavioural investing. This is equally important for the success in investing.

Your participation in my third stock pick service which started 8 months ago includes all the benefits above. For the specific stock picks, so far, a total of six have been done. The average return of the 6 stocks in the portfolio is 11.5% as shown in Table 1 in the Appendix, 4 times the return of the broad market of about 3% during the same period. There is not a single loser at the present. Note some of those picks were very recent and have not enough time to perform yet.

In this third stock pick service, I have also provided my portfolio in 2018 at the beginning of the year, in advance to the detail analysis and comprehensive reports for some of them which may become my specific stock picks. This is because scouting for good stocks and analysing and writing comprehensive reports is a long process, and by the time I finish analysing and writing on them, their share prices may have already gone up. So now you have a number of stocks to consider investing in in advance, using what you have learned on FVI from my online course. If you have paid attention to this, you would have benefitted too.

One additional service I am doing in this service, as you wold have noticed, is I also provide screening on recommendations and stock evaluation by professional analysts and good FVI bloggers. There are many good investment ideas from them. I only published analysts’ write-up on stocks which I think are good investing candidates for participants to consider to invest in.

Are they useful so far? Yes, definitely.

Table 2 in the Appendix shows the stocks recommended by professional analysts over this 8 months which have been screened and published by me in this service. A total of 17 stocks have been published. The average return of the portfolio was 6.0%, twice the return of the broad market over the same period. More than 70% made positive return, with 53% of them outperformed the broad market. Note also some of those picks were recent and have not enough time to perform yet.

Here is a recap of what you may have benefited from this third stock pick service of mine.

  1. My minimum specific 10 stock picks with detail analysis, valuations, and comprehensive reports
  2. The process of FVI using those stocks above; financial statement analysis, various valuations techniques, as what you have learned through my online investment course.
  3. Watch lists of specially selected stocks following proven-successful investment strategies.
  4. Learn and continuous learning on the proven successful FVI with the above.
  5. Periodic and quarterly review of the above which you can make ongoing decisions.
  6. Screening and selection of good stocks recommended by professional analysts.
  7. Join our exclusive telegram group of same right-minded people for sharing of ideas on investment

So, try to spend some time in this service as it may benefit you financially, and also knowledge wise.

And also, be reminded that there is no free lunch in this world, including investing and making money in the stock market. Never! You are too naïve to believe there is.

The only person you can rely on is none other than yourself. Make sure this person is competent with all the necessary knowledge, experience, and also guidance from trusted people and sources.