Investment Idea July 2011

It's come to the mid of the year, many fund manager are busy reposition their investment holding. Overall the market condition still in good shape as almost all the index breaking new high record, especially for Malaysia and US Market. While the Index continue to move higher, do you able to make good return in Stock Market?

One of my client ask me to help him find out why his investment portfolio continue making loses of more than 28%! He wish if he had follow my advise six months ago, today his portfolio could have been reverse. After reviewed with him, I did shared with him for reasons and he think it would be good to shares with all, I do feel the same as learning from others experience is a great advantage. Below are top 5 stock in his portfolio:

HWGB: cost 73 cent, loss 45%
Sanbumi: cost 39 cent, loss 36%
Mieco: cost 78 cent, loss 32%
Pworth: cost 70 cent, loss 30%
MAA: cost RM1.33, loss 48%At first glance, these are not so call investment grade stocks, only suitable for trading, not for Investment! So, if want to trade this kind of counters, make sure you have the trading plan   – a plan spell out clearly if the stock drop by 5%, need to cut loss or what? (in his case, he can not cut loss because he think one day the price will rebound, but I can tell, the chance is very slim) If earn by 15%, need to take profit... (in fact, many of the stocks managed to make some profit at first, but he just too greedy and without plan, hence miss the boat) If you want to go North, but notice the train you in now is moving South, shouldn't you get down immediately to avoid further regret? Direction or purpose of investing is quite important!   

Ok, now forget about his portfolio, do you know what's the reason for one portfolio continue to make money? Just refer to my previous post: http://vincpetrol.blogspot.com/2011/07/investment-idea-june-2011.html 

Investment is similar to buying a business, investor need to think like business owner. In the long run, buying Investment Grade stock is better than buying so so company, especially the current environment, only the best company have better chance to survive in next 10 or 20 years. Below simple check list to filter best company:

1. Make sure that stock you buy give dividend (at least 2x FD rate is even better)
2. Try to choose top Malaysia's company in the Industry
3. The Stock must have Institutional support (find like EPF, mutual fund, pension fund or foreign investment fund, find out usually buy)
4. The great business must able to increase in profit  (with ROE & ROA of more than 10%)
5. Last, buy at low price to have margin of safety (you may buy it now or wait for Market pullback to take advantage of cheap price)
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