How's Your Business Acumen?
"Buying
shares in a company is like doing the business with the company". This
is what I try to practice in stock market investment in the last 2-3
years.
Any business needs time to bear fruits, so I believe that I need to hold for longer term.
Even
though I have rather good "results" from speculating in stock market in
the past, I have told myself not to do this again, as advised by
Buffett & Cold Eye.
I
think I will make money rather than lose money if I continue to
speculate in the last 2 years while the stock market is in its uptrend,
because most of the stocks that I'm keen to speculate on went up in
share price.
Nevertheless, I manage to resist myself from speculating, even though there are a few occasions which I nearly do so.
If I continue to speculate in the past 2 years, may be I will earn less by owning less shares in Latitude, or may be I will earn more by selling Tambun earlier above RM2.40 to take more cash. So it's hard to know whether I'm better off by not speculating in stock market.
Nevertheless, I manage to resist myself from speculating, even though there are a few occasions which I nearly do so.
If I continue to speculate in the past 2 years, may be I will earn less by owning less shares in Latitude, or may be I will earn more by selling Tambun earlier above RM2.40 to take more cash. So it's hard to know whether I'm better off by not speculating in stock market.
It seems like it's easy to earn money in stock market. You just need to follow the theme.
What
are the hot stocks at the moment? Technology, furniture, poultry,
export-orientated etc. If you have your portfolio laden with these
stocks, then you are surely doing extremely well.
Are
you going to invest in property, oil & gas, plantation, finance etc
at this time? It doesn't mean that you will certainly lose money in
these stocks. They just need more time and patience perhaps. Remember
being a "contrarian" as advised by Buffett & Cold Eye?
To
be successful in stock market investment, apart from luck and homework,
I think that business acumen or foresight is very important.
Investment in a stock is exactly investing in the company's business. Thus we normally consider a company's:
- past records (how was the performance of its business & management team)
- future prospect (the demand of its products or services in the future)
- stock price (is it worth to pay that kind of price to be part of the business)
To
check a company's past record and to determine its value are not that
hard actually. The most difficult and important thing is to predict the
company's future prospect.
Most
famous and successful investors certainly have this either "gifted" or
"acquired" business "sixth sense" or acumen. They will see the business
opportunity earlier that other people.
When
I first started investing in stock market, past financial records are
the most important thing to me. I believe that if the company is doing
well in the past, it should have a good enough management team to do
well in the future.
As
I gain more exposure to stock market, I find that future prospect is
the most critical aspect which can "overwrite" past record and stock
price (current value).
If you follow this blog long enough, you should have known that I have "Four Heavenly King" that made me lost a lot of money.
Just
look at KNM's revenue and net profit from 2003 to 2008. Isn't the past
records magnificent? It has billions worth of contracts on hand as well!
I
didn't look too much into its balance sheet, cash flow or general
market sentiment. I bought its shares just before its revenue and profit
fell. So I got trapped.
The others are Notion & Masterskill which produced great earning reports too before they collapse.
Notion
was doing fine until the emergence of tablets and smartphones which
seriously eroded the demand of its hard disc drive and camera parts. If
my business foresight was good enough, then I would not put my money
into it.
The
old MEGB's management was not good enough I think. They was slow to
react when PTPTN loan was reduced and nursing course requirement was
raised. Why was it suffering while its direct competitor Mahsa seems to
do so well?
It's
hard to explain why I didn't add stocks like Hevea, Homeritz, Pohuat,
Mitra, Prolexus, Magni, Teoseng, LTKM, VS, Vitrox, MPI, Unisem etc into
my portfolio, even though they are under my radar and I know these are
good stocks with good potential.
Instead, I chose to buy stocks like HHGroup and Johotin which are not following the "theme play" at all.
Perhaps I have a tendency inside me to buy stocks which are not "hot" and are relatively unknown.
When I started to invest in Inari, Latitude and Tambun which are my best investment so far, they are all relatively unknown.
Anyway,
business acumen is very important, but I don't mean that I possess good
business sense. I still made a lot of bad decision until today.
Bad decision does not only mean buying the wrong stocks, but also missing the good opportunity.
Bad decision does not only mean buying the wrong stocks, but also missing the good opportunity.
Many
of us do not grow up in an environment that gives us this skill. So, no
choice, we have to read more, try more, and fail more in order to make
more correct decision.
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