I have posted many articles to encourage investors to buy Dayang. After reading their commentaries, I wish to point out their common mistakes so that readers can learn to improve their skill to make more money.
1. Doubting Thomas: they do not believe my honesty and sincerity in wanting to teach investors how to select good shares to make money. They thought I wanted them to buy to support the share price. As a result, many did not buy Dayang. Remember whether they buy or sell do not affect the share price because the daily transacted volume is tens of million shares.
2. Short term and day traders: They sell as soon they can make 20 or 30 % and hope to buy back at cheaper prices. Statistics shows that most of them lose money.
3. My golden rule for share selection: The company must report 2 consecutive quarters of increasing profit and the projected P/E ratio should not exceed 10. Many investors do not know that this is the best way to select growth stocks.
4. Fear and greed: Many investors are aware that the company needs to raise some money and a right issue might be called. Many expect the price will drop when the right issue is announced and they sold their holdings so that they can back at cheaper prices. They must be shocked to see that the price shot up 17 sen yesterday. Their hope of buying back at cheaper prices is shattered. Many are fearful to admit their mistake to buy back at higher prices. As a result, they will miss the golden opportunity to make money.
5. Margin Finance: margin finance is a double edge sword. It cuts both ways. You can make more money if you can select good shares but if you don’t know and chose the wrong shares, you lose more money. Only knowledgeable investors with experience can use margin finance.
6. When to sell: you must sell when the reason to buy is no longer valid. That means when Dayang reports decreasing profit, you must sell, or you have discovered a better stock to buy than Dayang.
7. My recommendation: Based on Dayang’s competitive advantage over its rivals, my immediate target price of Rm 2.00 is easily achievable in a few months. When it reaches Rm 2.00, you should not sell as long as it continues to report increasing profit. I must point out that the profit for the next quarter may be less than the preceding quarter which was 10.13 sen EPS. Due to its contracting work is seasonal, you must compare it with its corresponding quarter of last year.
Conclusion: I have been buying and selling shares for more than 50 years. I have read many books by famous gurus such as William O’Neal, Benjamin Graham, Warren Buffett, Peter Lynch, Glen Arnold and others. The 1st investment book I read was by Willian O’Neal which has a formula, a bit similar to my golden rule for share selection.
Almost all of them are preaching value investing which is a very safe method but I found that it takes too long to make money. You must remember among all the criteria such NTA, cash rich accounts, increasing revenue etc or example, the most powerful catalyst to move share price is profit growth prospect.
Currently there are many of the property companies selling below their actual NTA but it will take many years for these property companies to start reporting increasing profit.
Almost all my wealth is from share investing. My golden rule for share selection is well tested