Monday, 23 March 2015

How's Your Business Acumen?

"Buying shares in a company is like doing the business with the company". This is what I try to practice in stock market investment in the last 2-3 years.

Any business needs time to bear fruits, so I believe that I need to hold for longer term.

Even though I have rather good "results" from speculating in stock market in the past, I have told myself not to do this again, as advised by Buffett & Cold Eye.

I think I will make money rather than lose money if I continue to speculate in the last 2 years while the stock market is in its uptrend, because most of the stocks that I'm keen to speculate on went up in share price.

Nevertheless, I manage to resist myself from speculating, even though there are a few occasions which I nearly do so.

If I continue to speculate in the past 2 years, may be I will earn less by owning less shares in Latitude, or may be I will earn more by selling Tambun earlier above RM2.40 to take more cash. So it's hard to know whether I'm better off by not speculating in stock market.

It seems like it's easy to earn money in stock market. You just need to follow the theme.

What are the hot stocks at the moment? Technology, furniture, poultry, export-orientated etc. If you have your portfolio laden with these stocks, then you are surely doing extremely well.

Are you going to invest in property, oil & gas, plantation, finance etc at this time? It doesn't mean that you will certainly lose money in these stocks. They just need more time and patience perhaps. Remember being a "contrarian" as advised by Buffett & Cold Eye?

To be successful in stock market investment, apart from luck and homework, I think that business acumen or foresight is very important.

Investment in a stock is exactly investing in the company's business. Thus we normally consider a company's:
  • past records (how was the performance of its business & management team)
  • future prospect (the demand of its products or services in the future)
  • stock price (is it worth to pay that kind of price to be part of the business)

To check a company's past record and to determine its value are not that hard actually. The most difficult and important thing is to predict the company's future prospect.

Most famous and successful investors certainly have this either "gifted" or "acquired" business "sixth sense" or acumen. They will see the business opportunity earlier that other people.

When I first started investing in stock market, past financial records are the most important thing to me. I believe that if the company is doing well in the past, it should have a good enough management team to do well in the future.

As I gain more exposure to stock market, I find that future prospect is the most critical aspect which can "overwrite" past record and stock price (current value).

If you follow this blog long enough, you should have known that I have "Four Heavenly King" that made me lost a lot of money.

Just look at KNM's revenue and net profit from 2003 to 2008. Isn't the past records magnificent? It has billions worth of contracts on hand as well!

I didn't look too much into its balance sheet, cash flow or general market sentiment. I bought its shares just before its revenue and profit fell. So I got trapped.

The others are Notion & Masterskill which produced great earning reports too before they collapse. 

Notion was doing fine until the emergence of tablets and smartphones which seriously eroded the demand of its hard disc drive and camera parts. If my business foresight was good enough, then I would not put my money into it.

The old MEGB's management was not good enough I think. They was slow to react when PTPTN loan was reduced and nursing course requirement was raised. Why was it suffering while its direct competitor Mahsa seems to do so well?

It's hard to explain why I didn't add stocks like Hevea, Homeritz, Pohuat, Mitra, Prolexus, Magni, Teoseng, LTKM, VS, Vitrox, MPI, Unisem etc into my portfolio, even though they are under my radar and I know these are good stocks with good potential.

Instead, I chose to buy stocks like HHGroup and Johotin which are not following the "theme play" at all.

Perhaps I have a tendency inside me to buy stocks which are not "hot" and are relatively unknown.

When I started to invest in Inari, Latitude and Tambun which are my best investment so far, they are all relatively unknown.

Anyway, business acumen is very important, but I don't mean that I possess good business sense. I still made a lot of bad decision until today.

Bad decision does not only mean buying the wrong stocks, but also missing the good opportunity.

Many of us do not grow up in an environment that gives us this skill. So, no choice, we have to read more, try more, and fail more in order to make more correct decision.


  1. Nicely written BD, keep it up :)
    I agree with u, the lessons that we learnt through the painful ways are precious

    1. Thanks. I believe that almost everyone will go through some pain before succeed.

  2. Very good article and investing mindset! I found difficult to practice holding a share for long term, and to be contrarian. I learned a lot from your blog. Thank you so much! Bursa Dummy.

    1. For any writer, there is nothing more valuable than being appreciated. I want to thank you as well.

  3. same feeling! “over heat" stock make me uncomfortable, too.

    1. ya, may be there is some kind of uncomfortable feeling inside when a stock becomes popular and being chased up, even though it might still be undervalued...

  4. Hahaha,agreed.but sometimes I don't mind to have hot long as it is relevant to my interest n plan to hold long.still depend how v look at the company as.

    1. No matter hot stocks or cold stocks, those which can give good & fast returns are good stocks :)