Posted by sunztzhe > 2014-02-01 18:27 | Report Abuse

It is "good" to look for bombed out stocks with near zero downside risk and it is "cheap" to buy if the stock fundamentals gives increasing Revenue and increasing EBIT over the next 3 to 5 years.

Posted by bsngpg > 2014-02-01 19:30 | Report Abuse

KC Chong: I see this great article as an ang pao. Thks.

Posted by Wayhung Khoo > 2014-02-01 22:53 | Report Abuse

Great advise=]

Posted by speakup > 2014-02-01 23:09 | Report Abuse

one bombed out stock i can think of is KNM

Posted by speakup > 2014-02-01 23:10 | Report Abuse

KNM last loss quarter was in 2011, and has been profitable every single quarter since.

Posted by AyamTua > 2014-02-02 02:21 | Report Abuse

this article really fit : ntpm, hexza, homeriz, willow.. all potential $1.00 counters

Posted by cnyang > 2014-02-03 14:33 | Report Abuse

dear Mr Kong , ... Can you recommend us a few stocks that fall under defination for us to share with you.. PLEASE

Posted by kcchongnz > 2014-02-03 21:01 | Report Abuse

"Good stuff, cheap"

There are more than a thousand stocks in Bursa. Surely there are many cheap and good stuff. Please share here.

To recall from the article, attributes of good stuff are:
1) High return of ROE, ROIC, showing efficiency in operations
2) Good cash flow, free cash flow available for distribution of dividends which is sustainable, share buyback, paying down debts, making new investments.
3) High growth expectation

Attributes of cheapness:
1) Low PE ratio
2) Low enterprise value over earnings before interest and tax
3) Undervalued quality assets against its market price

Please share with your cheap good stuff for discussions here. Quantify as much as possible why you think it is a cheap good stuff.

An example here about Homeritz (RM0.665) recommended by ayamtua:

Good stuff:
1) ROE 21%, >>12%
2) ROIC 30%, >>10%
3) Both ROE and ROIC improving last two years
4) CFFO average 112% of Net income last two years, >100% good quality earnings
5) Plenty of FCF, FCF=16% of revenue (>10%), FCF/IC=29% (>>10%)

Cheapness:
1) PE=8.8 inexpensive
2) Earnings yield (Ebit/EV)=19.4% (>>12%) very cheap

It is beyond my ability to do all these for many stocks. Hope we can combine our effort to scout for good cheap stuff as well as learning from each other.

Some resources in i3:

http://klse.i3investor.com/servlets/forum/900214344.jsp
http://klse.i3investor.com/servlets/forum/900285510.jsp
http://klse.i3investor.com/blogs/kianweiaritcles/37729.jsp
http://klse.i3investor.com/blogs/kcchongnz/45296.jsp
http://klse.i3investor.com/blogs/stock_pick_challenge_2013_2h/36493.jsp

Posted by GenghisHoe > 2014-02-03 21:16 | Report Abuse

Hi KC Chong can we make a friend?