HAVE A STRATEGY EACH STOCKS YOU BUY

A rationale strategy is better than none.  This is to mitigate the high volatility of stock prices.

Example:

1.  Buy Gadang at RM1.80 in August 2014.

2.  Gadang dropped to RM1.14 in August 2015.

3.  Gadang rebounded to RM2.63 in August 2016.

4.  For those "smart or great investors" who follow quarterly results religiously and try to profit from the next correct prediction, that smart or great investors likely may have sold it in August 2015, why, quarterly dropping for 3 consecutive quarters.  

5.   It would be a disaster for a long term investors (for me 3-5 years), who have a short term expectations (looking at each quarters and make decision to buy or sell).  It is unwise.

6.  Hence, a rationale strategy for a stock (say, e.g. Gadang) may come in handy.  When the stocks dropped more than 20-30%, accumulate more if the LONG TERM earnings are sustainable and no major adverse impact on the executions of its plan.

7.  Of course, one must know or estimate their "intrinsic value" of the company first, else, a rationale strategy cannot be designed.  It is not asking you to ignore the quarterly results, sometime, is may be a good indicators of a trend, i.e. over supply in the market, margin squeezes, cost of construction doubled, some oil and gas contracts cancelled, management change, sell down by major shareholders etc.

8. Once you strategy is done, e.g. like Gadang, you bought at RM1.80, you believe in the long term (3-5 years) profits can double, say, have an estimates that the intrinsic value is about RM3.50 (for discussion only) & all financial indicators points that it is undervalued, so just execute your plan.  When it dropped to RM1.24 (dropped 30%), time to ADD or accumulate.

9.  Hence, your new cost is RM1.52.  Today is RM2.62.  Do you have a strategy for SELLING?  Depends on each individual risk appetite.  Another strategy, when you buy, make sure the PE is a the lower of the range band, unless you are 100% convinced that the growth is certain, like concession, or secure contracts.

10.  So, remember, besides picking a "winner" stock, also, have a "strategy for that stock".  Small cap companies are more susceptible to high volatility due to liquidity of the stocks.  Hence, a different strategy must be used.

11.  Ask yourself, can this be used in FLB? What about Tune Protect? 

12.  Of course, this is not something carved on stones, be flexible, this is a general idea.

LONG TERM INVESTMENT WITH SHORT TERM EXPECTATION

1.  Lately, especially for small or mid cap stocks have been chased up by many type of investors.  Some follow the blindly and not aware that the share prices may have over run the fundamental, using linear thinking of extrapolating the latest earnings.

2.  It would be a disaster, if you have a long term investment horizon (3-5 years) and your expect every quarter the earnings must increase and make decision out of that, likely you may lose money.

3.  Example, let just say, you just bought FLB yesterday at RM1.71, today, after the quarterly result it dropped to RM1.55, do you SELL immediately.  I remember there was an investor who was calculating the intrinsic value by disregarding the bumper year of 2015 where profit more than double, and mainly due to forex gain.  His calculation was consider conservatives and rationale, the intrinsic value he calculated is about RM2.10 - RM2.30.  

4.  Unless FLB one is pretty sure, structurely, the biz model "collapse", then, it could be time to unload.  It was mentioned the cost of log increased drastically, so the right question is whether this is perpectual and what is the worst case impact, and whether the intrinsic value can sustain.

5.  It would be different if this is a Mainland Chinese stocks, where the PE can be less than 1 time and yet there is no buyer. Why? No confident whether the figures is fake?

6.  It's strange, sometime the market may not give a high PE for Mainland Chinese stocks due to lack of confidence.  Similarly, why some low liquidity stocks always traded a low PEs (4-5 times).

7.  Like the latest fad, Pokemon Go, this quarterly "chasing" will sooner or later comes to an end.  It is a voting machine.  

SO, BUY MORE GADANG, OR BUY MORE FLB OR OCK W?

1.  Got a plan?

Disclaimer

This strategy is not absolute.  There is a wise saying, investment MUST be INDEPENDENT (not easily influenced by what other said or follows blindly what others said).  

This is neither a buy, sell or hold call.  Just a strategy.