The benchmark KLCI closed at 1406.00 last week.
It was another week of testing investors' patience & grit.
This week, let me share my views of characteristics of companies that I like on Bursa Malaysia.
1. Strong track record of financial performance.
Companies such as PBBANK, QL, AHEALTH, etc. are amongst my favourites. (the actual list is much longer, these examples are just the best examples)
PBBANK is one of the longest-listed companies on Bursa Malaysia, with very solid long term track record of increasing its revenue, profits and dividends. PBBANK has done well despite facing crisis after crisis. Anyone who held PBBANK in the 90s, 00s or 10s until now would have made satisfactory returns.
QL & AHEALTH share the distinction of having consecutive years of revenue growth that many other companies would envy. It shows that their management have been very focused and ambitious.
It is the stellar financial records of such companies that I have no worries holding them for the long-term, no matter how low the share price has fallen. The glove titans of TOPGLOV & HARTA also have formidable track records too, but the recent aggressive entry of Chinese glove companies & companies elsewhere have cast doubts to its future financials, which have been reflected in the plunge of their respective share prices this year.
2. Powerful brand
Consumer products companies usually rely on their distinctive brand & trademarks for customer loyalty. Examples are: NESTLE, F&N, HEIM, DLADY, MBMR, just to name a few.
Nestle, F&N, Dutch Lady, Heineken products are household names that are normally consumers' first choice in their respective product categories, whether cereals, milks, sodas, beers, etc. MBMR sells Perodua cars, and who doesn't know the brand of Perodua?
A distinctive brand is a competitive advantage. Competitors find it harder to take away sales and in the long-run, companies having a powerful brand generally gives confidence to investors that it can perform well over time. Although the demography of customers can greatly affect the sales, that is another topic altogether.
3. Founder-owned / Family owned
Companies where the founder or the family is still presently supervising or managing the company gives me confidence. Even more so if they are holding a substantial amount of shares.
If a company has been run well, and the same people are running the show, chances are the company will perform in more or less the same manner as before. The majority of company founders or family members with integrity won't destroy their own rice bowl and usually take actions in the best interests of the company. On the other hand, dubious founders would have no qualms letting their company rake up huge debts or have endless equity fund raising like rights issues.
Founder-owned companies like TOPGLOV, GENTING, CAPITALA, ICAP may not have founders that are revered by investors but they do have the best interests of the company at heart, unlike some founders whose companies exploded like a dynamite in the end.
There are many more companies which are owner-operated or family-operate, if one is diligent enough. But my favourite example for this category are QL and VITROX.
Using the three characteristics of companies above is definitely not enough for one to make a profit out of stock investing, esp. if one bought at high prices. However, these are my favourite screeners for long-term investments.
Disclaimer: This article is not tailored financial advice, but mere general stock sharing / observations. Please do further due diligence. The author disclaims all liabilities from readers. The author has interest in some stocks listed above.
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