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How a high PE company, biggest holder make big money, while others small holder fall to hell ,,,
Hiu Chee Keong
Publish date: Sat, 07 May 2016, 11:41 AM
Put your money in FD with 4%+ interest, that's about PE 25, so there is no good reason to buy a company share that has PE higer than 25 unless it has a good future earning.
but how can a comapny that has very high PE, say above 50, it's owner or major share holder still making big money ? Let see :
say if the owner own 30% of a listed small cap company with 30million capital, so he owned 9million worth. But his entire family members is holding high position in the company, and drawing salary and other benefits that worth 3 millions, despite the company has high PE with super low earning, their family still make big profit out of it while the other small shareholder fall to hell investing in this company. And we haven't count yet that the company give a lot business to other comapnies that owned by him or his relative.
So even the company sahre price fall 70%, the owner still make big money every year and enjoy all kind of benefits free.
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1 person likes this. Showing 8 of 8 comments
this also happen a lot in join venture between raltives or frineds, while the one manage the company enjoying good slaary and benefit,and bring in their son daughter in as well, but the sellpeing partner are ebing told the company make no profit, and being ask to inject more money into the business, eventually they break out and the one hold the management take overs the business.
So, even you can't be the fiunder, at keast don't be conned by the partner, or at least, you should be the one holding the management :D
2016-05-07 13:04
4% * 25 = 100%, means if you get 4% per-year, in 25 years you will earn 100%, PE 25 (just simple calculation without taking inflation and compound interest into account) :)
2016-05-07 13:16
for any modern economy, its better to have stock market than no stock market.
PE 25 does not mean the buy will hold for 25 years.
2016-05-07 13:27
For any newbies reading this: PE is price over earning. So, if you earn 4 sen for every ringgit in a year that's PE=100/4 = 25.
On another note, some research houses expected PE ratios for KLCI in 2017 & 2018 to be 15.3 & 14.6, well below average of 16.5. So keeping cash in FD right now is not a bad idea.
2016-05-07 19:24
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
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now that you know the truth, like everybody else also do.....the real question is can you be a founder of a company ?
2016-05-07 12:04