Type something and hit enter



Look at the business rather than share price (先注重生意,再看股价)

When new investors just started their investment journey, one of the first things they will first look at is the share price. They tend to be more interested in stocks that are cheaper as it seems to be more affordable. However, an intelligent investor should disregard the share price, and only focus on their business first.

It is relatively hard to do because you will need to do more research on their business models. For example, DUFU is a company that manufacture HDD components, and you will need to find out the demand of HDD, whether will it be sustainable for the coming years. On the other hand, we can also take glove as an example, they are currently being sold a lot due to the emergence of vaccine, but still glove is in no doubt that they will still be a necessity in the coming few years.

Benjamin Graham once said that it is better for stocks to have no quotation at all, so that emotions will not be accounted when buying a stock. Once again, we take one of the leader in glove sector, TOPGLOV as an example. Currently, their share price fell from RM10 to the current RM6.64, a 33% drop from their peak. After seeing the share price movement going downtrend, most investors will tend to avoid glove sector as vaccine is releasing to the world, and their share price has surged too much since April 2020.

However, if we are purely looking TOPGLOV as a business without any market quotation, will we invest in this company? The writer believes the answer will be yes. A company that have 50% of profit margin and 73% of ROE is not easily achievable by others. Imagine a company earn RM50 for every RM100 of sales they made, and return RM73 for every RM100 that shareholders invested. What a bargain!

Unfortunately, most of the investors nowadays are focusing more on share prices and trends, and eliminate companies that have a strong fundamental just because their trend has yet to emerge. Hence, they are some companies that are good but not paid attention to, such as palm oil companies and previously, banking companies. Investors and traders will only invest in these companies once they are trading at higher volume, and their price has started to move up.

In short, investors should focus more on company and business itself first, then only look at their share price, but not the other way round. No matter how high will the share price goes, once investors realize that the company has a weaker fundamental, the share price will eventually drop.







For more EXCLUSIVE content, visit: https://www.facebook.com/InvestingKnowEverything/



Click to comment
Back to Top
Back to Top