Thursday, July 26, 2012

Common Stock Uncommon Profit

"Common Stock Uncommon Profit" by Philip Fisher. To me, this is the best stock investment book I ever read. I had benefited from this book by applying his philosophy and method in Bursa Malaysia. However, I will not provide any comment on this book here.

What I intend to share here are stock investing strategy and stock selection that in my opinion will result in uncommon profit.

1st is buying growth stock that its profit going to increase substantially for years to come, and hold this stock for years to enjoy the grow of business profit. As business profit jump, share price sooner or later will follow. Then there is the likelihood that investors will value it differently that resulted in change of appraisal. Once change of appraisal is happening this stock will fetch a higher PE valuation. Time is good friend for this type of stock. As time passed, share prices this company will outperform the market as a whole then resulted  above average profit or uncommon profit. I like this approach very much. This is the method suggested by Philip Fisher 80 years ago, as today this method still intact. My favourite, Hartalega, is this kind of stock that I hold for years, and will hold for years to come.

2nd is buying good or above average business or stock during bad time or market correction. This method will caused you buy at lower entry price for good stocks. As, Benjamin Graham taught us the stock market is higher volatile and fluctuated, we must mentally and financially prepared to face it. Instead of ride through the up and down, which we are impossible to avoid, why not we are prepared to capitalize on it. Stock market tend to have a correction every 3-5 years and major correction or crisis every 8-10 years. I can not fight the market force, however I am prepared to capitalize on it. To be greedy when other is fearful. I don't mind other call me speculator, to me it is the uncommon profit that count. I practised philosophy of Benjamin Graham.

3rd is buying good new business or new product that will increase profit of a company substantially. The risk of this method is on the high side, but the reward can be very very high. Bursa Malaysia is short of this kind of company not like other countries. The best example I can think of locally is Jobstreet. If you vested since it listed, you are sitting on good return. Off course in US we have this Apple or Google.

4th is buying above average old economy industries. But you have to be quite sure that this type of company still able to achieve above average profit for years to come. Or this particular stock is undervalue or overlook by investors.

Friday, July 13, 2012

Market Comments

It had been quite sometimes I did not update my blog due to heavy load on my work and personal investment. Stock market, Bursa Malaysia, reached its all times high as above 1600. Hartalega, Public Bank and Allianz close to their all time high as well. Although I see no bubble on these counter, but I also realized that the whole stock market actually supported by "feel good" environment created by our Government. It is so unhealthy that the whole index is supported by these GLC or GLIC, further affected by the listing of heavy weight GLCs. My take is this situation would be "disappear" immediate after the election, it is better to reduce exposure and get ready for next wave of volatility. 

 Secondly, in my more than 10 years investing experience, I never seen investors priced the so called "dividend yield counters", consumer counters, defensive counters, telco or cellco aggresive. It is hard to believe that general investors can accept dividend yield of 3-5%, and further more PE is more that 20. Look at PPB, BAT, F&N, Nestle, Carlsberg, GAB, TM, Digi, Axiata, Pavillion Reit, CMMT Reit......blah blah blah. Is it because of low interest rate? I dont think so, we had been in this low interest time since 2008. Instead joining the party, it is always better to leave the party early and get prepared for the aftermath. Stock market is a place where only minority can survive in long run. To be fearful when other is greedy. 

 I also opine that this is the correct time to offload the 2nd, 3rd grade or penny stocks. If as today these stocks still below your purchased prices or under perform the stock market as a whole, forget about it. They will not perform neither better in near future, under this environment it still not going up, there are slim changes it going to go up in future.