30 August 2013

My Shares Investment Philosophy - Aug 2013

If you are following my blog, you can tell that I am more towards fundamentalist. However, it does not mean that fundamentalist can always win in the market. But from my experience, the few ways to earn big money is through:
  1. Long term investment in niche companies with some sort of better profit margins and good growth prospect. You have to be very patient and keep updated the business development progress of the company you are invested in, so that you do not be so eagerly to cut profit whenever the stock price drops further, instead you should stick to the principle that to buy at the lower price and not sell at the lower price. Always do a lot of homework by attending the AGM / financial report briefing / follow up with IR / market analysis by trying out the products & services. For some reasons, you may adjust your portfolio by reducing the position when the price moves up a lot and increasing the position when the price moves down further, provided the factors that affecting the stock price is NOT due to deteriorating prospect, rather it is just due to the macro environment. Some of the examples could be like Ezion Holdings, Sarin Technology, Silverlake etc. We could do some conclusion later after few years time. 
  2. Fully focused on winning bets with higher possibility. One of the examples is Margin of Safety. If the price you purchased is 70% of the intrinsic value, then the chances you are losing money is lesser compared to when the price you purchased is 130% of the intrinsic value. Note: Intrinsic value may volatile along the timeline but it is not as volatile as the stock price movement. So always deal with Mr. Market carefully.
  3. Look beyond the current investment hot topics. Normally when you realized that this is the hot topic of the investment, it means that you have lost a good chance to earn big. So it's either you move on or look beyond the current hot topics. Instead, find out the neglected counters and invest in it and sell it off when more investors are coming back. 
  4. Building up confidence level when you have more experience in winning the game. Sometimes, we cut loss or cut profit due to the inexperience in realizing the intrinsic value of the counter. When the market goes up, we feel that the stock price can be higher and forget that the price may go above intrinsic value and vice versa. 

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