The Most essential Lesson for all Investors-Koon Yew Yin

The Most Essential Lesson for all Investors - Koon Yew Yin

Author: Koon Yew Yin | Publish date: Sat, 21 Nov 2015, 11:02 AM

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Many of my close friends and my family members want to know how I dare to buy so much of VS Industry shares. As I have announced on 15^th June 2015, I have 20,445,600 shares, nearly 10% of the total issued shares before one share is split into 5 shares. I am also a substantial shareholder of Latitude and Lii Hen. The price charts show that every one of the 3 shares has gone up a few hundred per cent per year.








A super investor must have the following 7 traits or characteristic features:
Trait 1. Be a contrarian investor, the ability to go against the crowd in investing. You must not be afraid to buy when most people want to sell and sell when most people want to buy as if tomorrow is too late to sell.
Trait 2. A great investor is one who is obsessive about playing the game and wanting to win. These people do not just enjoy investing; they live it. They wake up in the morning and the first thing they think about, while they are still half asleep, is a stock they have been researching, or one of the stocks they are thinking about selling, or what the greatest risk to their portfolio is and how they are going to neutralize that risk.
Trait 3. A good investor is the willingness to learn from past mistakes or to admit that he or she has bought the wrong share. It is so hard for people to recognize their own mistakes and sell the bad share which they bought at a higher price. Most people would much rather just move on and ignore the dumb things they have done in the past. But if you ignore mistakes without fully analyzing them, you will undoubtedly make a similar mistake later in your career. In fact, even if you do analyze them it is not easy to avoid repeating the same mistakes.
Trait 4. A good investor must have an inherent sense of risk based on common sense. You must have the common sense to realize the risk of buying any share which has gone up a lot and when all the analysts are recommending buy. No share can go up indefinitely for whatever reason. Quite often you might be tempted to fall in love with your purchase because it has been going up and up. You are so proud of your pick and refuse to sell it. Remember your ego can skew your judgment.
Trait 5: Great investors have confidence in their own convictions and stick with them, even when facing criticism. Buffett never get into the dot-com mania and he was being criticized publicly for ignoring technology stocks. Eventually he was proven right. Unlike Buffet, we small investors can get in and out quickly and make some profit.
Besides confidence, you must have patience to wait to buy when it is has established a base and not buy when it has shot up due to some exciting hot news.
Trait 6. It is the ability to think clearly. Our brain has 3 basic functions. One is to circulate your blood and control your breathing. The second is your emotion and the third is logical thinking. All normal investors allow their emotion to control their logical thinking process. All successful investors can think clearly when faced with a problem.
Trait 7. Finally the most important, and rarest, trait of all is the ability to live through price volatility and fluctuation without changing your logical thinking process. This is almost impossible for most people to do when the share goes through a price correction. A swing up or down over a relatively short time period is not a loss and therefore not risk, unless you are prone to panicking at the bottom and locking in the loss. But most people just cannot see it that way; their brains would not let them. Their panic instinct steps in and shuts down the normal brain function.
Most investors believe that no share can continuously go up or come down indefinitely for whatever reason. They will sell to take profit and buy back during price correction. But quite often, the correction is mild especially if the share has fantastic profit growth prospect. They would not buy back at a price higher than the price they sold.
As you know VS Industry share price went up from Rm 2.5 to above Rm 8 in the last 15 months. I know of a foreign professional investor who sold VS at about Rm 4.50 because his chart indicated an unavoidable price correction. When the price continued to climb, he did not buy back because he has not mastered the above 7 traits.
If you want to improve your technic in investing you have to look at the 7 traits frequently until you have mastered them. You have to absolve them into your brain so that you can react automatically like a reflect action.
Basing on the last few quarterly earnings, I believe the company of VS Industry will be able to make more profit this year than last year which complies with my golden rule for selecting shares. But I am obliged to tell you that I am a substantial shareholder of VS. If you decide to buy, you are doing it at your own risk.

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Storm Over Southeast Asian Markets -- Koon Yew Yin

Storm Over Southeast Asian Markets

http://koonyewyin.com/2015/08/14/storm-over-southeast-asian-markets/

Investors in Malaysia need to be concerned over recent developments in our country as well as externally which have a direct or indirect impact on investor sentiment. Hence the continuing political crisis over 1MDB, the sharp decline in the value of the ringgit against the US dollar, the battered commodity market affecting primary producing countries and pull back by foreign investors all have contributed to the depressed stock market.

What has made it even more of a turbulent storm is the recent decision by China to depreciate the yuan.  Very few in the market – even among experts – expected this and the impact has seen the market take a further sharp fall.

There are two considerations that Malaysian investors may want to bear in mind looking ahead. One is that we are not the only country in the region that has seen its market fall badly. Believe it or not but in fact the Singapore share market – which Malaysians would expect to be the strongest and most resilient in the region – has dropped even more than the Malaysian one during the last one year. Of course, this is small or no consolation to our local investors who have lost money. But it puts into perspective the current market fall in our country for those who have started to panic about our local situation; and who think and mourn and groan that we are alone in experiencing this current market fall.

The table below compares the performance of the markets in the region and shows that only the small markets of Vietnam and the Philippine have remained in positive territory since the end of 2014. Besides Singapore, Indonesia has also taken a bigger hit than us.

The second consideration is that any economic storm will pass if the economic fundamentals are strong. While there may be many problems with our politics, I am confident that our economic fundamentals are not only strong but are superior to those in many other countries. This is why I have kept my money fully invested in Malaysian and continue to do so. This is why I am sure that we will weather the storm over our market right now.

This is the same in other countries where the fundamentals are strong. For those who have lost money and have lost heart, this is what Business Insider has to say in a recent article.

There is an equity risk premium in the markets. Over the long term, stock investors can earn average annual returns that are close to 5% above what they’d be able to earn at the risk-free rate. That’s a huge number when compounded over decades.

But it must be earned the hard way – battling through the worst the markets can throw at us. And, as both Buffett and Templeton can attest, it is when stocks are treating us the worst that this premium is right around the corner.

Read more: http://www.businessinsider.com/how-two-great-investors-handle-losses-2015-8#ixzz3ikc4taJS

Finally, a reminder, that the stock exchange consists of over one thousand companies in the Main and Ace markets. When you invest your money, make sure you invest in those whose fundamentals are stronger than others and who can take advantage of the shrinking Malaysian ringgit!

As I said many a time, successful investors do not let their emotion over rules their logical thinking process. They dare to buy when people are selling desperately and sell when people are euphoric.    

Change on year
Market	Current	End 2014	Pct Move
Singapore	3091.78	3365.15	-8.12
Kuala Lumpur	1621.62	1761.25	-7.93
Bangkok	1404.15	1497.67	-6.24
Jakarta	4584.25	5226.95	-12.30
Manila	7439.80	7230.57	+2.89
Ho Chi Minh	594.26	545.63	+8.91

How to interpret company announcements - Koon Yew Yin

How to interpret company announcements - Koon Yew Yin

Author: Koon Yew Yin | Publish date: Tue, 21 Apr 2015, 04:13 PM

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According to Malaysian Securities Commission’ rules all listed companies have to make announcements of their quarterly results and other business activities that are unusual to their daily business operations.
I would like to share with you my experience on how to interpret and take advantage of the various announcements as follows:

1. Announcement of quarterly result: this is often a catalyst to move share price. If the profit is good, the share price will go up but if the profit is not good the price will likely come down.
2. Announcement of purchasing a large piece of land for development eg MRCB’s recent announcement of signing the S&P agreement to buy the Germen Embassy land in KL for a few hundred million Ringgit. Many investors would think that it is a wonderful deal to be able to own and develop the property right in the heart of KL. But smart investors with some imagination must consider this purchase very risky in view of the oversupply of properties in KL. Moreover, it will take about 7 years to complete the project from planning approval to construction and sale of all the properties before you can see the financial result. At the mean time, investors are exposed to 7 years of risk.
3. Announcement of company share buyback is tricky to interpret. It can mean that the management wants to buy back its own shares because it is undervalued. But sometimes the management wants to prop up the price to stop the price from falling because of poor quarterly result. Investors must look at the profit growth first before buying the share. You may be tempted to buy because the chart says so. Share prices can be manipulated if the daily trading volume is small.
4. Announcement of right issues with free convertible warrants can be tempting to many investors. You must be careful to examine the true reason for calling the right issues. Do not subscribe blindly. Quite often due to poor management, the company has poor cash flow and the business has too many challenges. As a result, the company needs more cash. Moreover, this kind of announcement will push up the share price, offering you a chance to sell at a better price. You must remember that good profitable companies do not need to get money from calling for right issues.
5. Announcement of bonus issues is usually a good sign that the company is able to accumulate sufficient profit to issue more shares to benefit shareholders. This announcement will push up the share price. Of course the price will be adjusted soon after the bonus issue and the price will go up again if the company continues to show good result.
6. Announcement of share placement of not more than 10% of the total issued shares is a good sign that there is demand by fund managers to own these shares. If they buy them from the open market, it will cost more. This is reassuring to all existing shareholders because the big buyers would have studied the operation of the company in great detail before making such a big financial commitment. They should not think that their interest is being diluted. They must bear in mind that the company will have more cash for expansion which will benefit all the shareholders.
7. Announcement of a new substantial shareholder who bought all his shares from the open market is a good sign. According to S.C. rules, any investor who owns more than 5% of the total issued shares has to declare his interest. He has also to announce if he subsequently buys or sell the shares because his action will affect the decision making process of other investors.
8. Announcement of Company Directors’ buying or selling shares is a good indicator of the true value of the shares. All company directors have to make announcement when they buy or sell their shares. If they continue to buy more shares, it is a healthy sign, provided you know that the company is really doing well and that they are not buying them to simply push up the share price.
9. Announcement by a contractor of securing a large multi million Ringgit contract for the construction of a big project through the open competitive tender system will often encourage investors to rush in to buy the shares in anticipation of the company’s profit growth prospect. Many would think that the contractor with additional work would naturally make more profit. You must remember contracting is a very risky business because of the open tender system. The contractor has to take a lot of risk to submit the cheapest price to win the tender. That is why there are so few really successful listed contracting companies. Very often building contractors are also property developers.
10. Announcement of dividend is a good indicator of the company’s performance. The company that declares increasing dividend is definitely a good company. This shows that it has positive cash flow and can afford to benefit all its shareholders. This sort of company will not need to call for right issues to raise cash for expansion.
11. Announcement of privatization of the listed company is rare but when you see this type of announcement, you can make money if you know how to position yourself. The controlling shareholders offer to buy up all the outstanding shares that they do not already own, usually at a higher price than the current market price. As soon as you see the announcement, you can buy it before the price go up to the offered price. If you consider the offer is unreasonable, you can wait until they offer a better price. You must bear in mind that the better offer may not come and it may be more advantage to accept the cash offer and use the cash proceeds to buy other shares.

Conclusion: There are about 1200 listed companies and many of the companies are making announcements every day. It is impossible to read all the announcements. After you have read the above guidelines, you can select the useful announcements to read to save time.
Under the current condition, I will not read announcements by building contractors and property developers. I am not interested to know about huge land transactions.
I will also not read companies that have poor profit growth prospect.
As you know, our Ringgit is the lowest in the last 5 years and readers should look at announcements by companies exporting their products in US$.

Follow the World Bank procurement guidelines to prevent corruption and abuse

http://koonyewyin.com/2014/07/29/follow-the-world-bank-procurement-guidelines-to-prevent-corruption-and-abuse/

The World Bank has procurement guidelines which all the borrowers of Bank funding have to follow. The guidelines includes the system of calling tenders. It is a system which has helped to prevent corruption even in the most corrupted countries in the world.

Malaysians are getting fed up with the Government’s failure to reform the tender system as well as to check corruption and abuse which is costing us billions of ringgit annually, and bleeding the country’s finances dry.

Although the Government has appointed a Minister, Paul Low, to take charge of the implementation of transparency in the government, it is clear that he is getting nowhere. Senator Paul Low has claimed that he is highly motivated in promoting and implementing new transparency procedures in order to curb corruption and cronyism. Well, being motivated is one thing but running around in circles and establishing another layer of bureaucratic smoke and mirrors has been the main outcome of the Minister’s more than one year in office.

Implement the World Bank’s Procurement Guidelines

From my experience in business there is a simple way to curb corruption, abuse and leakage in Malaysia. This is by totally abandoning the system of negotiated tenders and by having true transparency but not transparency of the Paul Low or MACC bogus kind.

In its place we should follow the guidelines for open tenders and procurement laid down by the World Bank and other international development bodies.

When my colleagues and I successfully bid for a few of the contracts in the huge Muda Irrigation scheme project financed with World Bank funding in the 1960s, this was the system which we had to follow.

The government engaged a reputable engineering consulting firm which has had experience with similar projects to put up a proposal and to open the project bidding to all contractors to tender. The most important thing to note is that the consulting company responsible for the tender process should be independent and should have no interest whatsoever in the project implementation. This ensures that there is no hanky panky or “insider trading”. After the contract is awarded, the consultant makes sure that the project is completed within cost and scheduled time.

All the contractors must be prequalified based on their technical and financial ability. All contractors must submit tenders conforming to the original design so that the cheapest tender can be selected. If all the contractors are prequalified, the government tender board has only to look at the tendered price.

It is important not to allow anybody from the government to negotiate with any contractor to avoid corruption.

Transparency and accountability requires that all documents on the proposal be placed in the public sphere – not just limited information but detailed and full breakdowns in accordance with international best practices. This will ensure public monitoring and curbing of cost overruns which have plagued all mega projects in the country.

On the tender opening day all contractors and the representatives of press should be invited to witness the opening of bids and their tender prices should be publicly announced.

All contractors have to submit their tender according to the original design provided by the appointed consultant.

A contractor can also submit an alternative design provided that the price is cheaper and the quality is not inferior.

Additional Safeguards

Besides the Bank’s guidelines, I would like to propose the following safeguards since open tenders alone will not ensure a fool proof no-abuse procurement system for mega projects. These additional safeguards are based on my experience as a Chartered Engineer and as a member of the Malaysian Board of Engineers for 3 two year terms

Never invite contractors to submit project proposals for any mega project because each contractor will submit his own planning and design which will be impossible for the tender board to evaluate. You cannot compare the cost of an apple with the cost of an orange, a banana or a pineapple.

A contractor should not be permitted to take on the role of the engineering consultant responsible for design as well as that of the role of a construction contractor responsible for the project implementation as the two roles are of conflicting interest. If the company is permitted to do so, it will lead to public perception of abuse and corruption.

For mega projects, it is cheaper to employ a really qualified consultant to design the whole project rather than to ask each contractor to provide designs for different phases. The latter is false economy and will result in ballooning of costs.

Just Say “No” to Negotiated Tenders

In summary, the whole procedure of prequalifying contractors, calling tenders, evaluating and awarding the contracts must be carried out in a transparent way to avoid any suspicion of corruption. Such a system of open procurement is effective and can bring change even to the most corrupt country.

Why is it not followed and why do we still have the system of negotiated tenders which was established by former Prime Minister, Dr. Mahathir, and which opened the door to corruption on a grand scale in the country is a question any fool can answer. It can be safely said that hundreds, if not thousands of billions of ringgit have been lost because of this system of negotiated tenders and its associated abuse and cronyism.

Pakatan State Governments Must Also Say “No”

It is important for the public to ask this question not only for federal government projects but also for state initiated projects of the Pakatan governments. Take for example the recent news report that the construction giant Gamuda Bhd is the favourite to land the job as the project development partner (PDP) to oversee the implementation of key components of the integrated transportation plan on the island of Penang. Firstly, it is clear that Gamuda and all the other companies reported to be in the running for the massive multi-billion dollar project do not have any experience to be in the position of the overall design consultant.

They all are not engineering consultants. They all are construction contractors. Gamuda might have constructed the tunnel in Kuala Lumpur but they did not design it.

Secondly, CIMB Research has found it “pleasantly surprising” that the Penang state government opted for the Project Development Partner (PDP) structure similar to that of the Klang Valley MRT which has been heavily criticised for cronyism and abuse. From the rakyat’s experience, what is “pleasantly surprising” to contractors will definitely be unpleasant and disastrous for the public.

Alarm bells must be raised and concern expressed if such projects are given out even if supposedly on an improved or modified system of negotiated tender. Such a system has been defended by those in power to be more accountable or transparent and free from abuse or corruption. This is patently false.

Conclusion

Nothing less than a truly open, fully transparent and fully accountable tender system and process is, in my opinion, going to work if Malaysia is to check corruption and abuse.

If the Najib administration and Minister Paul Low, and the Pakatan state governments, really want to curb corruption and ensure good governance, accountability and transparency, they should stop farting around. The system to help bring it about is easily available – just follow what I have provided here.

The Great Malaysian Brain Drain - Koon Yew Yin

The Great Malaysian Brain Drain - Koon Yew Yin

Author: Koon Yew Yin | Publish date: Mon, 23 Jun 10:15
http://klse.i3investor.com/blogs/koonyewyinblog/

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By Koon Yew Yin
Many people including I have written about this subject before, but our Government just ignored what we said about the long term ill effect of losing our best talent. Now the orang puteh of the World Bank has highlighted this, perhaps the Government will listen more attentively.  

Let me give you a real example to show you why a clever Chinese boy would be forced to go to Singapore if I did not give him a scholarship.

Andrew Tan scored 10 A1s in his SPM in 2006. His mother is a primary school teacher and Andrew has two younger brothers. His father, a civil servant, died just before he sat for his SPM.

Armed with his excellent result, Andrew applied for a scholarship to study mechanical engineering. The government rejected his application. Petronas rejected his application too. Can you imagine how disappointed and frustrated he was?

As soon as I learned of Andrew's difficulty, I offered him financial assistance to do accountancy in Utar. He has been scoring top marks in every exam to earn a scholarship from the university.

 Although Andrew was exempted from paying fees, I still bank him RM700 a month to cover his cost of living. He graduated 2 years ago with first class honours.

Readers can help me find more poor students:
Up to date, I have given out about 250 scholarships to help poor students to complete their tertiary education locally. Readers can help me find more poor students if you know of any family with income of less than Rm 3,000 per month, please tell them to write to me koonyewyin@gmail.com. My selection criteria is based on financial need and not on academic achievement.

Asean (mainly Malaysian!) Scholarships: Our Brains, Their Gain
Singapore welcomes clever students like Andrew who are desperately looking for a chance to have a higher education. The pre-university Asean scholarship extended to Malaysians by 'the little red dot' Singapore offers the cost of school and exam fees, hostel accommodation, RM5,800 a year for expenses, RM1,200 settling-in allowance, and transport/air ticket. Furthermore, the recipient is not bonded. Or in other words, the giver asks for nothing back.

Of course, Singapore is not doing it for purely altruistic reasons. The country is giving these much coveted Asean scholarships to build up her national bank of talent. Some Malaysians accuse them of 'poaching' the creme de la creme of our youngsters. I don’t look at it as poaching. Their far-sighted government is doing it in their national interest.

And why not? Singapore can afford it. It has three times our GDP per capita. On another comparative note, the GDP per capita of Taiwan and South Korea are 2.5 times and double ours respectively. Before the NEP's introduction in 1970, the four countries were at parity.

The big question is why are we surrendering our assets which Malaysian parents have nurtured but the state neglected? As parents, we know how difficult it is to bring up children and train them to score top marks in school. Yet our country does not want them.

Tens of thousands of young Malaysians have left our shores on the Asean scholarship. I am not sure if Singapore is willing to give out the figure. But I am pretty sure the Malaysian Authorities do not give two hoots about this, whatever number they may have arrived at. If they have, there seems to be no policy change to stem the outflow.

Our statistics clearly show that a large number of Chinese and Indians, mostly with tertiary education immigrated and replaced by a larger number of mostly illiterate foreign workers. Is this the best way to become a developed nation like Singapore?
 
Behaving Like a Failed State
Consider this startling statistic: There are more Sierra Leonean doctors working in hospitals in the city of Chicago than in their own homeland. More Malawian nurses in Manchester than in Malawi. Africa's most significant export to Europe and the United States is trained professionals, not petroleum, gold and diamond.

The educated African migration is definitely retarding the progress of every country in Africa. Today, one in three African university graduates, and 50,000 doctoral holders now live and work outside Africa. Sixty-four percent of Nigerians in the USA has one or more university degrees.

If we carry out a study, we are likely to find a very large number of non-Malay graduates emigrating to Singapore, Australia and other countries that is proportionately similar to the African exodus.

 However the compulsion is different, seeing as how some African countries are war-torn and famished which is certainly not the case. The push factors for our own brain drain lie in NEP policy and this needs to be addressed with urgency

State Ideology: Be Grateful You Are Malaysian
Try putting yourself in the shoes of an 18-year-old. This young Malaysian born in 1991 is told that Umno was very generous in granting citizenship to his non-Malay forefathers in 1957. Thus as a descendant of an immigrant community – one should be forever grateful and respect the 'social contract'.

Gratitude is demanded by the state while little is reciprocated. Under the NEP – and some say this policy represents the de facto social contract – every single Vice Chancellor of every single Malaysian public university is Malay. Promotion prospects for non-Malay lecturers to full professorship or head of department are very dim, hence we have the dichotomy of non-Malays predominant in private colleges while correspondingly, the academic staff of public institutions proliferated with Malays.

The civil service is staffed predominantly by Malays too, and overwhelmingly in the top echelons. The government-linked corporations have been turned into a single race monopoly. Hence is it any surprise that almost all the scholarships offered by government and GLCs seem to be reserved for Malays?

Youngsters from the minority communities see that Malays are the chosen ones regardless of their scholastic achievement and financial position. Some are offered to do a Master even though they did not even apply (but the quota is there to be filled, so these disinterested Malays are approached).

Conclusion: Ensuring Fairness For the Future Well Being of Our Young
A segment of Johoreans cross the Causeway daily to attend school in Singapore. Many continue their tertiary education in Singapore which has among the top universities in the world. Eventually, they work in Singapore and benefit Singapore.

Ask around among your friends and see who hasn't got a child or a sibling who is now living abroad as a permanent resident. I can't really blame them for packing up and packing it in, can you? It's simply critical now that we don't let our kids lose hope and throw in the towel. The system might be slower to reform but mindsets at least can be changed easier.

It starts with the teachers, the educationists and the people running the education departments and implementing the policies. Please help Malaysian youngsters realise their full potential. Just try a little fairness first.

Personal Note:
Readers may be interested to know that I have five children all of whom are accomplished in their respective fields. Four of them are part of the brain drain and have chosen to settle down abroad; only one is back in Malaysia.

My son who has double degrees in civil engineering and chartered accountancy is an investor in Canada. He could be here to create hundreds of jobs to enrich Malaysia but he has been so disgusted with our policies and their implementation that he has chosen not to return. I am sure that there are tens, if not hundreds of thousands of similar young Malaysians that our country has lost, no thanks to our short-sighted educational policies. And yet the Government is so keen to attract foreign investors. Where is the logic and rationality?

Hope for the future: Basing on the last general election result, the BN Government won a reduced number of Parliamentary seats, enough to rule but the opposition parties won more than half of the total votes. That means there is some hope that the opposition parties will be able to gain enough of seats to rule and change the existing policies, in the next general election.

My share investment style - Koon Yew Yin

My share investment style - Koon Yew Yin

Author: Koon Yew Yin | Publish date: Sun, 25 May 17:57
http://klse.i3investor.com/blogs/koonyewyinblog/

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How I started investing in shares?
In 1983 I had my heart bypass surgery in London. While recuperating in Harley Street Hospital, I read from the newspaper that the Hong Kong stock market crashed because Margret Thatcher, the British Prime Minister failed to secure the extension of British rule of Hong Kong. The British had a 99 years lease of Hong Kong and a part of Kowloon. The lease was expiring and the Chinese Communists would soon take over.

Everyone was afraid and everything was on cheap sale. The stock market crashed.
At that time, I did not know how to select shares basing on the fundamental criteria of value investing. I did not know how to invest for long term or short term or timing the market to hit and run. I just bought shares that went down the most in terms of percentages. You can say that I started blindly.

As soon as China agreed to offer 50 years extension of capitalist system, the Hong Kong stock market rebounded and I sold all the shares I bought initially with more than 200% profit. With all the proceeds, I bought HSBC and other better known shares. After about 2 years, I made so much money that I bought 46% of the small stock broking company in Hong Kong that gave me margin finance which help me make more profit.
  
After this short experience in Hong Kong, I decided to retire as Managing Director of Mudajaya and be my own boss. Why should I work so hard when it is so easy to make money from the stock market? Moreover, all my profit is tax free and I don’t have any management problem. I do not need to deal with people which I find most difficult.
   
After my retirement, I have more free time to read. I have learned the investment philosophy of Warren Buffet, Peter Lynch, Benjamin Graham and others. I found the best book is called “Valuegrowth Investing” by Glen Arnold.
  
What is value growth investing? It means that the best stock to buy must be undervalued and it has strong profit growth prospect.

What is long term investment?

If I ask you all what long-term investing mean to you. I might get many different answers. Some may say 10 to 20 years, while others may consider five years to be a long-term investment. Individuals might have a shorter concept of long term, while institutions may perceive long term to mean a time far out in the future. This variation in interpretations can lead to variable investment styles.

For investors in the stock market, it is a general rule to assume that long-term assets should not be needed in the three- to five-year range. This provides a cushion of time to allow for markets to carry through their normal cycles. However, what's even more important than how you define long term is how you design the strategy you use to make long-term investments. This means deciding between passive and active management.

Long-Term Strategies

Investors have different styles of investing, but they can basically be divided into two camps: active management and passive management. Buy-and-hold strategies - in which the investor may use an active strategy to select securities but then lock them in to hold them long term - are generally considered to be passive in nature.

Active Management

On the opposite side of the spectrum, numerous active management techniques allow you to shuffle assets and allocations around in an attempt to increase overall returns. There is, however, a strategy that combines a little active management with the passive style. A simple way to look at this combination of strategies is to think of a backyard garden. While you may plant different crops for different results, you will always take the time to cultivate the crops to ensure a successful harvest. Similarly, a portfolio can be cultivated along the way without taking on a time-consuming or potentially risky active strategy.

Market Timing

When it comes to market timing, there are many people for it and many people against it. The biggest proponents of market timing are the companies that claim to be able to successfully time the market. However, while there are firms that have proved to be successful at timing the market, they tend to move in and out of the spotlight, while long-term investors like Peter Lynch and Warren Buffett tend to be remembered for their styles. Studies have shown that most day traders cannot outperform the market index because of the transaction cost.

The Bottom Line

If volatility and investors' emotions were removed completely from the investment process, it is clear that passive, long-term (20 years or more) investing without any attempts to time the market would be the superior choice. In reality, however, just like with a garden, a portfolio can be cultivated without compromising its passive nature. Historically, there have been some obvious dramatic turns in the market that have provided opportunities for investors to cash in or buy in.

My investment style

Basically my style is a mixture of all the above mentioned strategy including the use of margin finance to increase my profit. With due respect to professional fund managers, they consider current earning EPS the most important criterion. But, I consider future profit growth prospect is more important. For example, Jaya Tiasa which has very poor current earning but it has tremendous profit growth prospect. That is why it has gone up about 30% in the last few months.

It is easier for me to explain by showing you the shares I own and how I manage them. In view of the sustainable palm oil price increase in the near future, most of my investment are plantation shares eg Jaya Tiasa, Kulim, TH Plantations and Sarawak Plantations. Besides plantation, I have about 20% worth of my total investment on Mudajaya, MFCB and Success Transformers. I have only 7 counters so that I can closely keep track of them.

All my shares are pledged for margin finance. I normally use up to about 80% of the allowable limit.

How do I use Price Charts

I do not use charts to trade frequently. I only look at the long term price charts to buy shares that have been depressed for a long time. For example, Kulim is now selling at around Rm 3.50 which is lower than the average price in the last 3 years. This is simply not logical. It the last 3 years, Kulim’s plantation land especially those in Johore must have appreciated in value. Moreover, Kulim would have planted more oil palms and also made profit in the last 3years. I believe the price of Kulim will soon be re rated.

How I take advantage of the share price fluctuation

It is important to note that any share cannot continuously go up or come down for whatever reason. I must take advantage of this phenomenon to make money. For example, I have sold some Jaya Tiasa because it has gone up 30% within a few months so that I have funds to buy Kulim, TH Plantations and Sarawak Plantations which have been depressed for a long time. Jaya Tiasa is still my largest holding.
  
Please note that all the shares I bought are meant for long term. But it does not mean that I cannot sell them to get money to reduce my borrowing or to buy some other shares which are relatively cheaper.
Those who wish to know more about my investment style or have questions to ask, please attend my seminar on 1^st June as according to my announcement.

 

Basic Share Investment Philosophy - Koon Yew Yin

Basic Share Investment Philosophy - Koon Yew Yin

Author: Koon Yew Yin | Publish date: Thu, 1 May 18:53
http://klse.i3investor.com/blogs/koonyewyinblog/

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Koon Yew Yin

Fundamental Analysis

When talking about stocks, fundamental analysis is a technique that attempts to determine a security's value by focusing on underlying factors that affect a company's actual business and its future prospects. On a broader scope, you can perform fundamental analysis on industries or the economy as a whole. The term simply refers to the analysis of the economic well-being of a financial entity as opposed to only its price movements.
Fundamental analysis serves to answer questions, such as:
Is the company's revenue growing?
Is it actually making a profit?
Is it in a strong-enough position to beat out its competitors in the future?
Is it able to repay its debts?
Is management trying to "cook the books"?
Of course, these are very involved questions, and there are literally hundreds of others you might have about a company. It all really boils down to one question: Is the company's stock a good investment? Think of fundamental analysis as a toolbox to help you answer this question.

The Concept of Intrinsic Value

Before we get any further, we have to address the subject of intrinsic value. One of the primary assumptions of fundamental analysis is that the price on the stock market does not fully reflect a stock's "real" value. After all, why would you be doing price analysis if the stock market were always correct? In financial jargon, this true value is known as the intrinsic value.
For example, let's say that a company's stock was trading at $20. After doing extensive homework on the company, you determine that it really is worth $25. In other words, you determine the intrinsic value of the firm to be $25. This is clearly relevant because an investor wants to buy stocks that are trading at prices significantly below their estimated intrinsic value.
This leads us to one of the second major assumptions of fundamental analysis: in the long run, the stock market will reflect the fundamentals. There is no point in buying a stock based on intrinsic value if the price never reflected that value. Nobody knows how long "the long run" really is. It could be days or years.
This is what fundamental analysis is all about. By focusing on a particular business, an investor can estimate the intrinsic value of a firm and thus find opportunities where he or she can buy at a discount. If all goes well, the investment will pay off over time as the market catches up to the fundamentals.
The big unknowns are:
1)You don't know if your estimate of intrinsic value is correct; and
2)You don't know how long it will take for the intrinsic value to be reflected in the marketplace.
Criticisms of Fundamental Analysis
The biggest criticisms of fundamental analysis come primarily from two groups: proponents of technical analysis and believers of the "efficient market hypothesis".

Technical Analysis

Technical analysis takes a completely different approach; it doesn't care one bit about the "value" of a company. Chartists are only interested in the price movements in the market.
Despite all the fancy and exotic tools it employs, technical analysis really just studies supply and demand in a market in an attempt to determine what direction, or trend, will continue in the future. In other words, technical analysis attempts to understand the emotions in the market by studying the market itself, as opposed to its components. If you understand the benefits and limitations of technical analysis, it can give you a new set of tools or skills that will enable you to be a better trader or investor.
You can use technical analysis to:
1. Identify profitable stock patterns
2. Minimize your risk
3. Maximize your return in up and down markets
You’ll learn how to make big money on stocks using a technical analysis toolkit that has been wielded successfully for hundreds of years. That’s no exaggeration.
Put simply, technical analysts base their investments (or, more precisely, their trades) solely on the price and volume movements of securities. Using charts and a number of other tools, they trade on momentum, not caring about the fundamentals. While it is possible to use both techniques in combination, one of the basic tenets of technical analysis is that the market discounts everything. Accordingly, all news about a company already is priced into a stock, and therefore a stock's price movements give more insight than the underlying fundamental factors of the business itself.

Efficient Market Hypothesis

Followers of the efficient market hypothesis, however, are usually in disagreement with both fundamental and technical analysts. The efficient market hypothesis contends that it is essentially impossible to produce market-beating returns in the long run, through either fundamental or technical analysis. The rationale for this argument is that, since the market efficiently prices all stocks on an ongoing basis, any opportunities for excess returns derived from fundamental (or technical) analysis would be almost immediately whittled away by the market's many participants, making it impossible for anyone to meaningfully outperform the market over the long term.

Random Walk Theory

As mentioned above, if all the shares would have been efficiently priced, how can you make money? In the Random Walk Theory, this is the idea that stocks take a random and unpredictable path. A follower of the random walk theory believes it's impossible to outperform the market without assuming additional risk. Critics of the theory, however, contend that stocks do maintain price trends over time - in other words, that it is possible to outperform the market by carefully selecting entry and exit points for equity investments.

My Method

As I am not an accountant, I use my common sense to select shares, like buying a small part of a business. It must be a business with long term good profit growth prospect. It must be undervalued and not many analysts write about it. I do not buy famous stocks which are frequently in the news because they would have been fully priced.
Although buying bank shares are very safe, I do not buy them because their rate of return is not good enough for me.
I also do not buy property development shares because I think the supply is more than demand as you can see there are so many vacant properties unsold. That is why banks have imposed stricter loan conditions to discourage speculation.
The best shares to buy are plantation shares because of the palm oil price increase which is sustainable for this year and the near future. Due to the poor palm oil price for the last one or more years, all plantation shares have been depressed. With the CPO price increase, all plantation companies will enjoy additional profit for no extra effort, getting additional profit for doing nothing.
After having selected any share I wish to buy, I must look at the price chart to make sure that the price is reasonably cheap. For examples the price of Kulim or TH Plantation is about the same or lower than the average price for the last 2 or more years. In view of the CPO price increase, I am sure almost all plantation shares will be show better profit in the next few quarters. As a result, I am sure of making good profit.
    
Conclusion: How to make profit?

After you have bought some shares basing on one or a combination of two or more methods as mentioned above, you must sell to make profit. You must bear in mind that no share will continue to go up in price for whatever reasons and no share will continue to come down for whatever reason. To make profit, you must not fall in love with the shares you have bought and keep them forever. You must sell so that you have money to buy the same share when the price makes a correction or buy another undervalued share.
Like most investors, I frequently have difficulty to decide when to sell to make profit. The best time to sell is when I see that the company is showing reduced quarterly profit. If the company is showing increasing quarterly profit, I do not sell too early.

Now, what you need is some LUCK which is what happens when preparation meets opportunity. 

an excellent article to share from Mr Koon Yew Yin

TH Plantation traded in large volume - Koon Yew Yin

TH Plantation traded in large volume - Koon Yew Yin

Author: Koon Yew Yin | Publish date: Thu, 24 Apr 11:03

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http://klse.i3investor.com/blogs/koonyewyinblog/50812.jsp

Koon Yew Yin - 24^th April 2014

Yesterday the total volume traded for T H Plantation was 2.6 million shares, while its daily average traded is only about 200,000 shares. The share price traded between Rm 2.03-2.05 and closed at Rm 2.04, up one sen.

In my previous article I posted on 27^th March 2014 with a title ‘Best Time to buy Plantation Shares’. My main reason for writing the article was to alert readers that due to the recent price increase of CPO, almost all plantation companies will be able to make additional profit which is the strongest catalyst for pushing share prices up.

In that article, I stated that I was buying TH Plantation among a few other plantation shares I was buying. This exceedingly high volume traded attracted my attention.

The Computer can tell you everything you want to know

As I am only a novice in technical analysis, I have to find out the importance of volume in predicting price movement in order to write this article. So I found out from the computer which can tell you everything you want to know.
   
The two methods commonly used to analyze securities and make investment decisions are fundamental analysis and technical analysis. Fundamental analysis involves analyzing the characteristics of a company in order to estimate its value. Technical analysis takes a completely different approach; it doesn't care one bit about the "value" of a company. Chartists are only interested in the price movements in the market.

Despite all the fancy and exotic tools it employs, technical analysis really just studies supply and demand in a market in an attempt to determine what direction, or trend, will continue in the future. In other words, technical analysis attempts to understand the emotions in the market by studying the market itself, as opposed to its components. If you understand the benefits and limitations of technical analysis, it can give you a new set of tools or skills that will enable you to be a better trader or investor.

While price is the primary item of concern in technical analysis, volume is also extremely important.

What is Volume?

Volume is simply the number of shares traded in one day. The higher the volume is the more active the security. To determine the movement of the volume (up or down), chartists look at the volume bars that can usually be found at the bottom of any chart. Volume bars illustrate how many shares have traded per period and show trends in the same way that prices do.

Why Volume is Important

Volume is an important aspect of technical analysis because it is used to confirm trends and chart patterns. Any price movement up or down with relatively high volume is seen as a stronger, more relevant move than a similar move with weak volume. Therefore, if you are looking at a large price movement, you should also examine the volume to see whether it tells the same story.

Volume should move with the trend. If prices are moving in an upward trend, volume should increase (and vice versa). If the previous relationship between volume and price movements starts to deteriorate, it is usually a sign of weakness in the trend. For example, if the stock is in an uptrend but the up trading days are marked with lower volume, it is a sign that the trend is starting to lose its legs and may soon end.

Volume and Chart Patterns

The other use of volume is to confirm chart patterns. Patterns such as head and shoulders, triangles, flags and other price patterns can be confirmed with volume, a process which we'll describe in more detail later in this tutorial. In most chart patterns, there are several pivotal points that are vital to what the chart is able to convey to chartists. Basically, if the volume is not there to confirm the pivotal moments of a chart pattern, the quality of the signal formed by the pattern is weakened.

Volume Precedes Price

Another important idea in technical analysis is that price is preceded by volume. Volume is closely monitored by chartists to form ideas on upcoming trend reversals. If volume is starting to decrease in an uptrend, it is usually a sign that the upward run is about to end.

Good Luck

Best Time to buy Oil Palm Plantation Stocks - Koon Yew Yin

Best Time to buy Oil Palm Plantation Stocks - Koon Yew Yin

Author: Koon Yew Yin | Publish date: Thu, 27 Mar 21:59

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Koon Yew Yin 27^th March 2014 from i3 investor .com

Like most commodities, palm oil price also moves in cycle. There are several reasons why commodity price is cyclical in nature. The price of any product depends largely on the theory of supply and demand which also depends on other economic factors such as economic expansion, recession, interest rate and other factors, all of which are also cyclical in nature.

A few weeks ago, I posted an article under the title ‘Palm Oil Price Trend’ on this forum where I said the average CPO price was Rm 2,250 for last year per ton and in the recent Malaysian Palm Oil conference, all the experts expect CPO price to rise to Rm 3,000 soon. The average CPO price for this year will most likely be about Rm 2,750 per ton. As a result, all plantation companies will enjoy an additional profit of RM 500 per ton for no additional effort, literally for doing nothing.

As we all know, due to the poor CPO price for last year, the share price for all plantation companies have been depressed. Most of them are on cheap sale.

Since the CPO price is at the beginning of the uptrend cycle, all plantation companies will show increasing quarterly profit in the next several quarters.



About 80% of my total investment is on the plantation sector. I have Kulim, FGV, SOP, TH Plantation and Jaya Tiasa and their closing prices are Rm 3.40, 4.46, 6.40, 2.00 and 2.75 respectively. I must warn you that if you decide to buy, you are doing it at your own risk.

Warren Buffett’s 2013 annual letter - Koon Yew Yin

Warren Buffett’s 2013 annual letter - Koon Yew Yin

Author: Koon Yew Yin | Publish date: Tue, 4 Mar 16:05

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In all my articles on investment, I have been telling you to invest like a businessman. It is more important to be able to know how much profit the company can produce in the next few years than to worry about its current earning. You must know the difference between investing for the productivity of the asset versus investing on hopes that the share price of the asset changes.

Let us look at what Warren Buffett has to say to all his shareholders:

Warren Buffett’s 2013 annual letter to Berkshire Hathaway shareholders will be released shortly.

Buffett bulleted five fundamentals of investing, which we paraphrase:

“You don’t need to be an expert in order to achieve satisfactory investment returns.” But Buffett also warns that the investor should recognize her limitations and “keep things simple.

“Focus on the future productivity of the asset you are considering.” Buffett notes that no one can perfectly forecast the future profitability of an investment. “[O]mniscience isn’t necessary; you only need to understand the actions you undertake.”

“If you instead focus on the prospective price change of a contemplated purchase, you are speculating.” Buffett has nothing against price speculation. But he emphasizes that it’s important to be able to know the difference between investing for the productivity of the asset versus investing on hopes that the price of the asset changes.

“With my two small investments, I thought only of what the properties would produce and cared not at all about their daily valuations. Games are won by players who focus on the playing field — not by those whose eyes are glued to the scoreboard. If you can enjoy Saturdays and Sundays without looking at stock prices, give it a try on weekdays.” In other words, focus on the long-run.

“Forming macro opinions or listening to the macro or market predictions of others is a waste of time. Indeed, it is dangerous because it may blur your vision of the facts that are truly important.” So mute CNBC, Bloomberg TV, and Fox Business. Unless Warren Buffett comes on.

Buffett open this excerpt with this quote from his mentor Columbia University finance professor Ben Graham: “Investment is most intelligent when it is most businesslike.”

Read the whole except at Fortune.CNN.com
Valuegrowth Investing
I recommend you to read “Valuegrowth Investing” by Glen Arnold in which Professor Arnold has written about Warren Buffett, Ben Graham, Peter Lynch, David Dreman, Charles Munger and John Neff, like lecture notes. Instead of reading thousands of pages, you can read all about these investment gurus in one book of 334 pages.

Koon Yew Yin scholarships - Koon Yew Yin

Koon Yew Yin scholarships - Koon Yew Yin

Author: Koon Yew Yin | Publish date: Thu, 27 Feb 15:00

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All students, irrespective of race and religion who have secured a place to study for the foundation course in any of the public Universities in Malaysia, including UTAR, are eligible to apply for scholarships from Koon yew yin.

The scholarship provided will be sufficient to cover tuition fees and cost of living expenses for the one-year foundation course.

On successful completion of the foundation course, the students will be required to apply for the government PTPTN loan to complete the degree courses chosen by them.

Conditions:
1. Scholarships will only be given to needy students whose parents are earning less than RM3,000 per month. Applicants must have passed SPM with at least 5A.

2. Scholarship recipients after completion of their degree courses are not required to compensate in any way for the financial support received. The only condition is that they will have to promise to help other poor students when they themselves are financially secure and in a position to help the unfortunate and needy.

3. All applications should be sent to the address below with appropriate parents’ salary or pay vouchers or other evidence of income as well as offer letters from the universities. For students with parents engaged in self employment, a letter of reference from a school teacher or official on the financial status of the parents will be sufficient.

4. The selection criteria is based on applicant’s financial need and not on academic achievement.

Contact by post to
Mrs Koon Yew Yin
65, Lingkaran Meru Valley,
Meru Valley Golf and Country Club,
Jelapang, 30020 Ipoh
Perak
Or contact by email: kitpheng@gmail.com

Note: I have given more than 250 scholarships to help poor students to complete their tertiary education. The attached photos taken during the recent Chinese New Year celebration, shows some of the graduates who benefitted from my scholarships.

This is how I want to spend my money effectively to create happiness. Just see how happy they all are. When they are happy, I am happy.

Remember, after you have made more money than you really require, you must not forget that you cannot take it away when you die. You must do charity and create happiness which is our ultimate aim in life.

Among these graduates, standing 3^rd from the right is Wan Pui Yee with 9A1 and 2A2 in SPM and sitting 3^rd from right is Andrew Tan with 10A1 in SPM. Both of them could not get scholarships from the Government. They would have gone to Singapore if I did not offer them my helping hand.
If you know of poor students who need financial help, please tell them to apply.