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I retired from as a founder director of IJM Corporation Bhd. in 1983 when the Hong Kong stock market crashed because China gave notice to the British Government to take back Hong Kong.

I started investing in the Hong Kong stock market as there were so many cheap underpriced stocks. Among several other stocks, Hong Realty & Trust was my largest investment. It was selling at HK $3.60 per share. It was selling at HK$ 13.60 per share before the crash. The net asset value of each share was HK$ 10 cash and HK$ 4 in real estate.

Anyone could have made money if he was not afraid to buy HK Shares when the market crashed. As soon as China agreed to give 50 years lease extension, the stock market rebounded immediately. HK Realty & Trust rebounded back to HK$13.60. Within one year, I made so money that I bought 46% of a small broking firm called Kaiser Stock & Share Co. Ltd.

After my H K experience, I decided to concentrate on share investment because all my profit is tax free and I have no management problem.

I started reading the methods preached by investment gurus, like Warren Buffet, Peter Lynch, Benjamin Graham and others. They all recommend you to buy undervalued stocks.

I started to buy undervalued stocks but I found out that I have to wait for a long time to make money.

For example, currently there are many really undervalued property counters. But if you buy them now, you will have to wait many years to see the companies showing increasing profit for the share prices to go up.

There are many selection criteria such as NTA, healthy account, discounted cash flow, EPS, etc. I consider earning per share growth is the most powerful catalyst to move share prices. Always look for companies that can make increasing profit and with good profit growth prospect.

My share selection golden rule:

After several years of trial and error, I have now simplified my formula for selecting shares.

Before I start to buy, I must make sure that the company can make more money in the current year than last year by looking at the EPS growth for the last few quarters. To prevent some unforeseen business challenges, I will not buy it if its projected P/E ratio is above 10.

For example: Focus Lumber’s annual profit EPS was more than 30 sen and its 4th quarter EPS was more than 10 sen. It is currently selling at Rm 2.20.

Coincidently Lii Hen has similar profit result as Focus Lumber and it is selling at Rm 2.40 per share.

In the stock market investors always overreact on good or bad news. Due to the recent strengthening of our Ringgit, most investors just dumped their export company shares as if the companies will lose money which is not true.

I spoke to Lii Hen and was told that they have more than 50 American distributers and they can increase their selling price in view of our stronger Ringgit.

I am obliged to tell you that I am a substantial shareholder of each of the above 2 companies.

I have been using my golden rule to buy Latitude, Lii Hen and VS all of which have gone up a few hundred per cent in the last 2 years.

Koon Yew Yin 官有缘 - My success story in share investment
http://koonyewyin.com/2016/04/29/my-success-story-in-share-investment/
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