As I said before, no share can go up or go down indefinitely for whatever reasons. When it is up, you must sell some so that you have money to buy when it is down. My biggest mistake is that I fell in love with my shares so much that I did not sell when they were at their peak.
EGO: Ego is the root of my problem. I am so proud to have found shares that went up a few hundred per cent within a couple of years and if I sold them, I have less shares to boast.
GREED: Another problem I have is greed, which is one of the deadly sins. It can be a virtue or a vice. In the stock market, it encourages investors to work harder to find good stocks to buy and continue to buy but then we forget about selling. That is often one of my biggest mistakes.
From the several articles I have written and published, you would know that I have discovered Latitude, VS, Lii Hen and a few other stocks which have gone up a few hundred per cent in the last couple of years. But my big mistake is that I always find difficulty in selling. I fall in love with my discoveries and I did not sell more when their prices were peaking.
In my letter titled, “Export Manufacturers Share Prices Dropped Too Much”, where I said that due to the 3.5 per cent strengthening of our Ringgit their share prices dropped too much. Most investors overreact to good or bad news.
The MYR per USD chart shows the average rate for the last 3 months was RM4.30 to one USD and the rate on February 5 was RM4.15 to one USD, a 15 sen or 3.5 per cent drop. Smart investors should be able to see that this 3.5 per cent strengthening of our Ringgit should not cause the export manufacturers share prices to drop more about 20 per cent. For example:
VS dropped from RM1.68 to RM1.32, a drop of 21 per cent. Note 1st Quarter EPS was 5.22 sen.
Focus Lumber dropped from RM3.02 to RM2.28, a drop of 25 per cent. Note EPS for last 3 quarters was 3.22, 7.8 and 9.35 sen, respectively. It has no borrowing. Some of its cash saving is in USD.
Chin Well dropped from RM2.28 to RM1.84, a drop of 19 per cent. Note 1st Quarter EPS was 6.07 sen.
Latitude dropped from RM8.05 to RM6.63, a drop of 18 per cent. Note 1st Quarter EPS 28.95 sen. It has about RM200 million cash saving and some portion is in USD deposit.
Lii Hen dropped from RM2.97 to RM2.35, a drop of 21 per cent. Note EPS for last 3 Quarters were 6, 7, and 8.6 sen. It is cash rich and no borrowing.
If I had sold more when their prices were at or near their top, I would have a lot more cash to buy back when they subsequently dropped so much.
On Chinese New Year eve, Ooi Teik Bee rang me to seek my opinion regarding the strengthening of our Ringgit. He said that he has spoken to a highly respected investor who said that due to the bad publicity of our political situation, he thinks that our Ringgit will continue to be weak, which is good for exporters.
I also agree that our Ringgit will continue to be weak and I foresee more foreign funds will come back to take advantage of our weak Ringgit.
Most investors have difficulty in selling. As I have learned a humble lesson in not selling, I hope this article will help you improve your investing skill to make more money.
I wish you a Happy and Prosperous Chinese New Year.
Koon Yew Yin