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So you also want to become value investor (10) ? what to buy and when
stockmanmy
Publish date: Fri, 16 Dec 2016, 04:02 PM
stockmanmy
0 76
Trade at your own risk. I am here only to vomit out my feelings
From KYY Golden Rule:
Buy up trending stocks provided they have good profit growth prospect and selling at low P/E ratio
Works like magic for the gifted ones.
Here's why :
- Buy uptrending stocks......
You don't want to waste time with forgotten stocks, Lots and lots of low PE stocks are time wasters, moving side ways, moving nowhere. Some, whose business is deteriorating or that recently had a strong run might even be down trending. So you want an uptrending stock. The earlier you can catch the trend, the lower your costs, but higher the chances of trend failure. ( too late in the trend, its a goner).
So, there is a cost and a trade off here....the earlier you catch the trend the lower your costs, but also higher the risk it is not a trend., just some fluctuations. Wrong trend, no trend. Too late in the trend, you fear catching the top. I wish somebody can invent a differential equation so we can participate at the optimum point. But if such an equation has been found , it will self destruct as everyone tries to outperform the other.
Trend is very important. KYY do not play for chicken feed. He plays for major trends. A few good trends a year is all it takes to make a huge difference.
-Good profit growth
That is where business sense comes in. He buys simple businesses. Nothing too complex, nothing too complicated, nothing too difficult to understand. In that sense, it is similar to Warren Buffett stock picks.
-Selling at low PE
If the market is efficient, if you restrict yourself to low PE stocks, most of the time you are looking at small caps, not blue chips, You are also looking at stocks the market has forgotten, has ignored., probably not covered by analysts, or low / no growth stocks or in some cases negative growth stocks.
The more rules you have, the tigher the rules, the likelihood is that your portfolio is going to be focused on stocks of similar characteristics.
Definitely not a diversification or safety strategy. It is going to be a focused portfolio. Its feast or famine for you. You got to know what what you are doing.
On the other side of the ledger, you get the following advantages :
you can make a big difference via the stockmarket
because the portfolio is low PE, you get followers once the trend is set, The range from low PE to high PE and especially if you catch it while the company is growing its earnings, you are looking at multiple baggers. The buyers who follow you after you have bought the share are the ones to take it higher for you to make a profit. So, you want quality buyers, you want institutions to follow you, if at all possible. You do not want speculators to follow you after you have bought the shares. Speculators disturb and muddy the waters. You want genuine investors to follow after you. You want to lead the institutions, not led by institutions under this strategy. If you get involved in high PE shares, what follows you are only speculators, not genuine investors. Anyway, it is easier to read the psychology of genuine investors than the psychology of speculators.
- Use margin accounts to increase your profits potential.
If you have margin accounts, you can keep buying shares as long as the shares keep going up. In theory, there is no upper limit to how much you can make as long as you are correct.
I call that Dynamic Investing. It is a Dynamic view of the world. It is not a static view of the world. Things change. You adapt to it. When you read Financial Statements don't just look at the static stuffs like ratios and positions as at Balance Sheet. Look for changes. Look for what has changed ( for the better or for the worse). NTA and intrisic valuations are useful up to a limited point only. Don't believe what they tell you about margin of safety.
A good buy is a good business, with good people and good numbers in that order. A good buy can take you a long long way .
The only safety and the only one to make money for you is yourself. Margin of safety is an illsuion. It is your business sense and your risk intuitions that matter at the end.
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Be the first to like this. Showing 35 of 35 comments
His article comprises lot of theories that are Untested in battle field
That is why you feel the "myth"
Just like what Marx did for his Marixsm theory - a lot of theoretical stuffs that sound wonderful but once you put them into real life practice, they just screw up big time
2016-12-16 17:11
what to buy and when?
and at what price?
So what, what and when?
Example(s)?
I'm just curious to know how it would be applied with your so-called "dynamic investing".
icon just did it, which has attracted more readers and followers.
2016-12-16 17:12
KYY golden rule works well when it is in its most simple form - buy stocks that this year earning likely to be higher than last year
However, once you incorporate your all these additional unproven features, the whole thing turns meaningless
2016-12-16 17:16
Wow, new pil formulated but untested.
And start boastingly promo in the market,
Bad marketing strategy.
Worst than Snake Oil Salesman.
2016-12-16 17:20
Your comments welcomed. It does not discourage me.
It just shows the job not done yet, plenty of work to do.
and one more thing....the job never gets done because it is about human beings, not physics. Humans very fickle one.
2016-12-16 23:40
icon
so what has margin of safety given Puncak at 90 sen since your margin of safety?
2016-12-17 09:28
raider
your margin of safety is an illusion.
Its now down 64% from the margin of safety.
If this article can discourage people from margin of safety plays, I would be happy and glad already.
2016-12-17 09:38
raider
your margin of safety is an illusion.
Its now down 64% from the margin of safety.
If this article can discourage people from margin of safety plays, I would be happy and glad already.
Mammy,
thats the trick of margin of safety investment....the more the share down from the margin of safety....the better the value and more attractive the investment loh!!
2016-12-17 09:41
that is only deceiving yourself.....you lost money already.
------------------
Mammy,
thats the trick of margin of safety investment....the more the share down from the margin of safety....the better the value and more attractive the investment loh!!
2016-12-17 09:45
Desa, your article is full of holes. I am very disappointed. You can do better, come on !!!
2016-12-17 10:10
mistake Number 1 :-
"Buy uptrend stocks" is not a bad idea, but not a pre requisite for success.
I bought Geshen, Johotin, Tguan, etc when they are not on uptrend. But I still made tonnes of money from them within a period of 12 months (not 3 or 10 years !!!). KYY tried to play Uptrend by chasing Johotin and Geshen when they announced good results, and his fingers got burned. Go ask him for details.
So, don't tell me that you must buy Uptrend stocks in order to succeed.
2016-12-17 10:15
mistake Number 2 :-
You cautioned against buying stocks selling at low PE. You worried about Value Trap, lack of institutional followings, etc....
Wrong !!!
Your comments are true 10 years ago. Now no more true. Read my article : "How to punt stocks in information age"
In the past, valuation is determined by Institutional Investors, so small cap stocks traded at depressed valuation. However, as I argued in my article, with the advent of information age, retailers are now in charge.
Nowadays no matter big cap small cap, as long as you can generate profit, retailers will re-rate the stocks. Who cares about institutional investors ?
For example : Geshen had market cap of RM50 mil when I bought it, it was subsequently re-rated from 56 sen to closed to RM3.00
Another example : Chee Wah has RM50 mil market cap and was re-rated to RM100 mil within few weeks.
Wake up Desa !!! Stop fantasising about Rose Chan !!! That was a bygone era !!!
2016-12-17 10:25
Yes margin of safety stocks....once rerating started, share price will surge like what Icon said the return will be fantastic loh....!!
No need always trending up stock mah...!!
2016-12-17 10:34
Desa no need to condemn margin of safety. stock raider doesn't buy stocks based on margin of safety
stock raider buy stocks based on re-rating potential (superlon, Ajinomoto, etc) but use margin of safety to evaluate downside
so, there is nothing wrong with the concept of margin of safety
2016-12-17 10:40
ICON,
I ALSO BUY INTO PUNCAK RM 0.90....ON PURE MARGIN OF SAFETY INVESTMENT BCOS NETT CASH RM 2.50 PER SHARE LOH....!!
THIS TYPE OF INVESTMENT IS ON A LONGER TERM PLAY MAH...!!
2016-12-17 10:50
In my opinion, which stock and the timing to buy may not be applicable or easy as say and done. In Malaysia, the big fishes (especially insiders) already know whether which stocks to push or "play" it up before they start asking the stupid Research analysts to publish and recommend to all other retailers to buy. So when all the retailers start to buy these big fishes will sell. Sometimes, you may wonder why there are sellers when the news of the company is so promising; don't tell me the sellers are stupid when the news is so convincing that the stock is going to be moving up???
2016-12-17 12:12
icon /raider
buy with margin of safety can wait until neck long and hair white only to see paper losses keep growing.
rerating? rerating is on better prospect, not on margin of safety. Its the good old business sense again.
2016-12-17 15:18
icon
in a perfect market, highly efficient market, there is no more gems to be uncovered on low PE stocks, that all low PE stocks are a reflection of their declining prospects. Stock picking is on the premise of an imperfect market.
The trick is the effective use of business sense to uncover low PE stocks that has better prospects.
2016-12-17 15:25
that I can agree. But looking at the charts and the assets of the company, I would say 80 sen is a fair reflection after the dead cat bounce is over.
Apollo Ang > Dec 17, 2016 12:42 PM | Report Abuse
if follow results,gadang should be 0.70cts only not 98cts now
2016-12-17 15:28
Your Speaking has expose your limit, Stockman .
Icon8888 bro, has always one step ahead the market.
2016-12-17 15:28
ven
I have not reached nirvana yet...but one do not need to have reached Nirvana to post opinions and articles in this forum.
2016-12-17 15:31
Cut crap, search the winner .
Don't waste your time by talk something u end up cant benefit from it.
2016-12-17 15:37
Really ?
In what way ?
I don't even care, as long my strategy work on me.
Your are hole everywhere .
2016-12-17 15:45
Put it simple lar,
To test your Dyna can work not, tell me when EG going to deliver ?
2016-12-17 15:49
those who buy and sleep sure donate to KYY because everyday he and his gang been manipulating his stocks.if anyone buy his stocks they will dump for u all and push other stocks. after u all sell it back to them only they will push it up
2016-12-17 15:50
If we want to be early, there are 2 conditions to be met. Firstly, the sector prospect must be bright. Secondly, the recent profit jump can be sustained in the next few quarters. These are the tricks. However, don't try to be early in Matrix, Hohup, Trop and the likes or you will be trapped there for donkey years
You have rightfully pointed out that the IT thing has made information easily available and investing landscape has been considerably changed as a result. Things have evolved. It is so good to see old Icon8888 is still able to keep abreast with trend.
Posted by Icon8888 > Dec 17, 2016 10:15 AM | Report Abuse
mistake Number 1 :-
"Buy uptrend stocks" is not a bad idea, but not a pre requisite for success.
I bought Geshen, Johotin, Tguan, etc when they are not on uptrend. But I still made tonnes of money from them within a period of 12 months (not 3 or 10 years !!!). KYY tried to play Uptrend by chasing Johotin and Geshen when they announced good results, and his fingers got burned. Go ask him for details.
So, don't tell me that you must buy Uptrend stocks in order to succeed
2016-12-17 16:00
did one say try not to be early in Matrix, Hohup, Trop? Sounds like you are stepping into the realm of market timing, good luck. If a sector prospect is bright, how can one possibly be considered early? Did you go into steel counter before their results improve? That means you would have likely been trapped as per your comment. Or did you went in after the results? Means you are not early. No fence for you to sit on.
I should write to the CEO of Matrix, Hohup and Trop, and ask if they feel trapped by their share price. Probably doesn't stop them from become filthy rich anyway. If I can have a 95% confidence that I can make 100% profit on an investment within the next 5 years, which imply a 20% CAGR, do I care if I'm trapped for 3 months, 6 months, a year, 2 years?
2016-12-17 20:58
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cheoky
whether i read your article, you like to give a sense of mythical feeling. You would like to rebut some plain and basic value investing idea like margin of safety. Perhaps, you are thinking with such action, you will gain value investor follower to your termed dynamic investing. Macam Icap Tan. Wrong I Think. You got some acceptable points but lots of parameter which require foreknowledge. Foreknowledge induce further uncertainty and more personal judgement which carry error of judgement. That why cant sink in my mind. I prefer icon article. Rational and reasonable.
2016-12-16 16:21