Wednesday, June 10, 2009

Retail Investors' Mistakes #2 - Buy & Hold Mentality


It used to be that you buy stocks to hold forever. People will cite instances where they bought Genting or IOI ten years ago and made huge returns. Yes, that is a possible strategy. If you are going to adopt the buy and hold strategy, you should also know that there are only certain type of stocks that you can buy and hold. They must have a bright long term outlook. They must be well managed with a good management track record. They must be relatively transparent and treats minority shareholders relatively well.

But look at your portfolio, you certainly cannot buy and hold when you have MK Land, KUB, Perisai, etc... in your portfolio. This is not to say these stocks are bad, these stocks do not yet qualify to be solid buy and hold stocks.

Buy and hold stocks must be able to ride out the volatility and will be able to tap onto a global or at least regional market. Hence you don't buy and hold stocks that mainly has the local market only as their client base. The other considerations include looking at their return on assets and return on equity over a 5 year period at least. These must be good solid figures, at least 5% or higher. Then look at net margins over 5 years, they must be around the 10% or higher region at least.

If you buy the second or third liners, you have to actively manage your portfolio. There will be times to be 100% invested, there will be times you want to be 50% in cash or totally in cash. You cannot and should not be always 100% invested all the time.

p/s photo: Fiona Sit Hoi Kei

22 comments:

Fusion Creations said...

Dali,

Hope you had had a great time in OZ.

Would you however, like to share a couple of counters with your readers, what u currently perceive as a good buy n hold kinda of strategy in a basket of share counters

Richard Cranium said...

Excellent advise. Especially the one about MK LAND...

joker said...

dali,

i bought TA-WB shares one day be4 being suspended at 0.5sen, without knowing it will be suspended be4 expiry date on 24/6.

i knew i made a dumb mistake. im here to share with all that warrants not necessarily stop trading on the expiry date. so...becareful when u buy warrants.

given current price of 1.08, i am in the money. i was informed that i need to wait at least 2 weeks be4 i get my new shares upon conversion.

do you think i should exercise the warrants? plus i cant exercise all becoz i dont have enough fund to do so. so...any takers?

RAD said...

Dear Dali
Thank you for your recent advice on Pelikan
I wonder if the stock is soaring because of your write-up
I am sitting on a small pile of profit now

Sincerly
S. Radhakrishnan

RAD said...

Dear Dali

Need your views on these two plantation stocks Kwantas and KM Loong

Personally which one would you prefer as both have attractive entry prices (as opposed to IOI etc).

Regards
S. Radhakrishnan

easystar said...

I would argue that unless you have more information than the general market, 'actively managing' those doggy companies should be seen as gambling/investing rather than investing.

They could wake up in a morning and decided to acquire a 'friendly' corporation and dilute its stocks by 50%, or decided to pay themself big bonuses, or reveal black holes in their accounts.

One cannot 'actively' manage a portfolio to avoid losses from selfish/stupid companies managements of businesses with no unique advantages.

Tony said...

Joker,

You must be pretty new into this warrants kinda of stuff. Alway check before buying.

No napshot.

Wat yr offer? I would be happy to see if I can help. I am a passive market player

Tony said...

Easy star I certainly agree with you. Lots of discipline is involved.

solomon said...

I study your posting especially the behaviour. If you are close to the regulators and operators, for that, I know the equities pullback is not far away.

I am not clapping hands when the pullback happen. But, I am convinced that your article is to caution investor not to blow their heads over the 3 months rallies.

My prediction is this week will be the best time to exit and stay clear off the line. The next 2 weeks will be good time to enter when the correction takes place. My next bet will be Leader Universal. What say u?

hng said...

Dear Dali

Do you have investment idea on Tanjong. The share price just trade year low today at 13.00!

Wonder what happen on this stock, while most of the stock are trading year high, tanjong share seem react in opposite direction?

joker said...

tony, i have more than 80k TA-WB warrants that i cant exercise. are u interested? if you want to buy TA shares now, it is better to exercise d warrants at RM1. current price is 1.10.

since u sound like expert in warrants, i think u know more than me, so i better stop here.

email me iamjoker2008@gmail.com

dali,care 2 share??

Salvatore_Dali said...

fusion,
u dont have to ask me... if u have to ask me, the counters i will say wont be as good... if there r good buys or sells, i will post accordingly, no need to ask... if i dont post buys for a long time, it means i see no good buys

rad, dont take this the wrong way, but i am not running an investment advisory service.. u can ask, but if i post nothing, it means i have no time or knowledge or view on those stocks

easy, agreed... but u know even if you advise punters not to punt, they will still punt... all i am asking is that even if u r a punter, u must still actively manage yr portfolio

solomon, u read my mind well...

joker, its 80,000 warrant, even if u bot at 8 sen thats 6,400 ringgit... i would advise to convert... to get someone else to buy n convert is quite a hassle, just write it off if u have no funds to convert ... if u look at current mkt, it will still be billion shares per day for at least a few more weeks, which means TA should still be good for a 1.20 level

asd said...

Hi Solomon,

We may have short memories.

Care to share your reasons why one should sell this particular week & the collect back the following 2 weeks?

RN

RAD said...

Dear Dali
No, I will not take it the wrong way
It is not easy maintaining an active blog such as this
Once in a while when you are able to comment, i am happy

Sincerely
S. Radhakrishnan

joker said...

thanks dali for da advice.

if i convert 80k warrants = RM80k to pay for 7.5k net profit if i manage 2sell at 1.10. but i dont have that much. lol. instead of letting it lapse,maybe someone is interested at 0.5sen?

anyway,thanks again.

asd said...

Dear Joker,

Take the advice from Dali.

If you do not have that much funds, then subscribe for 3K.

When the share reaches 1.20 (the first resistance level)You should be able to make just less than Rm600.

It would then compensate your outlay of rm400+ which you paid for the warrants in the first place.

Hope this strategy will make you feel better. Then you can concentrate your energy on other opportunities available.

My 2 cents worth.

RN

solomon said...

Good day Asd,

Equities game to me is just like buying odds by looking the winning probability (like horse racing)and reading the herd's psychology.

This week, Bursa (Father) warns investors and the operators (sons)have to listen.

Just imagine, all the buying bids on the TOP10 disappear tomorrow and futures moving south...you will see the consequences...the herds will panic and dump. By then, slowly pick still not late.

Because I don't mix with any regulators or stock operators, I am info handicapped. But, he does. I am leveraging on him on this regards.

Salvatore_Dali said...

solomon,

i am going to say this only one time.. i have no association with any syndicates... i do have friends at bursa n sc but they r not "feeding me info" ... i do not have to defend or justify anything, everything i write is based on published info, i have no access to mgmt of big companies or even bigwig dealers or investment bankers feeding me info...

solomon said...

Noted Dali. This clarifies it once and for all.

asd said...

Hi Solomon,

Thanks for your reasons on the market. Let us wait & see.


RN

asd said...

Hi Joker,

There is another possible solution to your TA-WB situation.

There is a house that is financing this subscription.


RN

joker said...

asd,

what is it? pls explain.