The dilemma of when to sell

The dilemma of when to sell

Numerous articles/comments/views have been shared by so many stock gurus - local and abroad about when is the right time to sell shares. Many times, I have also been asked by my friends/followers when is the correct time to sell their shares especially those with some profit margin to cash in.

I wish I have a super crystal ball to show me so that I won't have to worry of the potential headache should I advised them to sell and only to see the share price rising further ahead.

Most of investors must have experienced this before. If you have been following my blogs since day one, I am sure you will know that three of my previous stocks, Hup Seng Industries Berhad, Keck Seng (M) Berhad and Pharmaniaga Berhad went on to scale new highs again and again AFTER I had sold them off for an already superb profit.

The potential headache occurs when our share starts to record higher and higher paper profits. While one is thrilled to see its share gaining higher paper profits, one is also in a dilemma.

What if the share price starts to experience massive profit taking and hence the paper gain would be retreating back again?

What if the share price experiences a sharp u-turn suddenly and retreat back to its original price? Or worse still, below its original price!

What if after selling the share for a profit, the share continues to ascent even higher to new records high?

Such is the dilemma for EVERY INVESTOR when there is paper profit to be realised. Such is the peer pressure to take profit when there is opportunity to do so that in my survey among my group of investors, many are likely to lock in their profit at around a 10-30% gain.

On numerous occasions, I congratulated them for their 10-30% profit and I poked this simple question : Why are you taking profit at this level? The  answer is : A 10-30% margin is a good one! Well, my fellow friends, there is no right or wrong once you have realised a profit from your investment.

An investor with this type of mentally thinking will never experience massive major profit because he never allow the share price to possible scale new highs again and again. How many of us has experience MORE than 100% return from its investment?

For one to be able to achieve a MORE than 100% return, one must have that strong heart of steel to hang on to its running winning stocks for long periods. During those periods, there were bound to be the share price pulling back due to profit taking or market correction or even a poor quarter earning result. Even with continuous excellent quarterly results, the rising share price will also experience occasional pull-backs due to various factors, internal or external ones.

Personally when I buy a stock, I do not aim for a 10-30% return. I aim for 50-100% or more because I believe winning a few bigger and massive amount  of wins are better than trying to win several 10-30% returns. But that is easier said than done.

As I said earlier, to achieve that kind of massive returns, one must possess the hearts of steel and sadly very few have that. The fear of paper profit turning to paper loss is enough to prompt many to take profits as quickly as possible even though the profit realised is only a 10-30% range.

Focus Lumber's share price in new territory

Of late, my 2015's most favourite stock, Focus Lumber Berhad has seen its share price inching up higher by the weeks and is now at near its all time high of RM2.50 plus minus range. (I hope I am right about this).

My average cost price per Focus Lumber share is around RM1.50. So at this stage, my paper profit easily exceeded 60% should I decided to give my remisier a call to sell.

Am I excited about this? I would be telling you a lie if I say I am not. Yes, I am feeling excited about the rising share price of Focus Lumber. I have many reasons to feel so.

When I first started to invest in Focus Lumber and more subsequently, I was actually placing my reputation at stake as I know many of my friends and followers would also be buying this share as well following my articles about Focus Lumber.

I would never know if any of my friends/followers have bought more than me. Only they know themselves and they would not be telling me less I ask them for "ang pow" should they profit tremendously from Focus Lumber later. (Seriously I was just joking about that statement only).

A few have told me they have taken profit before the share price crossed the RM2 mark. Some had sold a certain portion of the shares along the way. Some are still with me. A few have reminded me that should I sell, they want to be the first to know. Some have jokingly said they would take profit when it touched the RM2.50 mark. Well, it crossed that price on Nov. 11, 2015. (I am wondering if they are true to their words).

By the last week of Nov, Focus Lumber should be announcing its 3rd Qtr results. How would it turn up to be? But judging from its sharp run up price, investors must be confident of another set of good results, hence the strong buying interest that pushed up the price.

Until then, let us wait and hope.

Read, read and read

Read, read and read

Remember the SYL (Sweet Young Lady, sorry not SYT or Sweet Young Thing because she is really a sweet young lady) who regularly posts motivation and meaningful notes on her Facebook?

Yours truly continues to be her ardent reader/fan/supporter (you name it) ever since I got to know her. Some of her meaningful notes even touched  my spouse so much that this SYL was in her thoughts from time to time.

My spouse showed her appreciation by presenting her a personally home-made Durian moon cake recently. (One of the toughest tasks in preparing moon cake is the stirring of the paste where one stands in front of the burning gas stove for long period of time). I should know because I was ordered by my spouse to carry out that stirring duty).

I am happy to share with you that it has been a great wonderful year for this SYL. She fulfilled her dream of visiting South Korea early this year (luckily before the depreciating ringgit against the US dollar).

SYL has been in love for a long time since her early days with .... almost everything about what South Korea has to offer. SYL loves their series drama, music, food, places and SYL can even speak a bit of Korean!

SYL recently upgraded herself with a new sporty car. I called the car Pinky because it was in beautiful shinny pink colour and the car really matches her as both were rather small size. In Bahasa Malaysia, we call it "secocok".

Indeed SYL is a wonderful friend to have and yours truly has the privilege to be in her lists! There is one more thing .... SYL is also is my gadget Shifu. I learnt a great deal from her on how to use the various apps and this has helped me a lot. Ironically, both of us happened to be using the same model hand phone and both of us incidentally bought it one week apart.

While I called her my Gadget Shifu, she sees me as her Financial Shifu which I am a bit flattered. SYL is now keen to learn about the Financial issues and I am glad that I am able to share my knowledge and experience  with her.

For her young age, SYL is actually matured in her thoughts as I found out.

Many gen-y at her age would most probably be enjoying life to the fullest without much a care of what is going to happen tomorrow, but not SYL. She is concerned about the future with the constant rising cost of living and inflation.

SYL hopes to learn about Financial issues which can help her to be in a good financial position. I termed it as Financial Freedom. (Anyway, Financial Freedom is another issue, perhaps I like to share with my readers in the future).

I wish her a very successful financial future in the years ahead.

Recently I came across one of her posting sharing about the secret why only a few per cent of people are more successful than the majority. And the secret is so simple : read, read and read.

Research has shown that the majority of people do not read. Why? Are they too busy that the time for reading is not there? Or they do not know how to read? Or they find reading a waste of time? Or they do know where to search for related reading materials/information? Or reading is not the trend anymore?

I think the reasons/excuses for not reading could be endless if I were to go on asking many people.

According to the "secret", people who spend some time reading certain subject tend to be more knowledgeable about that subject

Now back here, my question is : Do you read? If you read, what do you read? What interests you to read? If that particular subject is of no interest to you, you are unlikely to read. So this brings us to the subject of interest to us. You might read something of a particular subject you are interested in.

For example if a person is interested in plant, chances are he will search high and low for reading materials/ideas on that. And if he consistently  reads again and again over a period of time, this person is likely to know a lot about plant. What he knows is known as expertise/valuable knowledge which will be only useful for him if he applies it into action!

This reminder to read also reaffirmed my belief that one should read a lot if one is interested about a particular subject. I recalled those days when internet access was very limited to the public and searching for reading materials/ideas about investing/companies' profiles/investment strategies  was very difficult.

I read A LOT about all these whenever possible. I also spent a great deal of time reading those investment magazines, The Edge, Personal Money, Smart Investors, Focus Malaysia and many annual reports.

I am not "malu" to say that those days when I went to the toilet for my usual morning business, I would carry a few annual report with me. It was during "those moment" when my attention was about what was written about the  annual report rather than what I was ACTUALLY doing.

My annual report books were filling up my big cupboard apart from all those stocks magazines and The Edge. My wife was constantly reminding me I should do something about this before my whole reading room becomes a giant library!

Thanks to the internet, I do not keep many hardcopy annual reports anymore. I still did keep some, but maybe due to the beautiful pictures and unique designs of the annual reports copies.

The so many years of reading has actually helped me to understand the financial positions of companies although I must again admit that there are many financial reports with a lot of figures that I cannot understand fully.

Nevertheless it has been a great help for me when it comes to investing as I stand a better chance of knowing the financial health of a particular company rather then simply investing into it without a slightest knowledge of it.

So for those who not want or wish to read before jumping into a stocks, you are most probably taking a risk only you will be responsible.

Then again, it is your money and you are your own king.

Keck Seng - The next decade

Keck Seng

- The next decade

Keck Seng (Malaysia) Berhad (Keck Seng) is a cash-rich and asset-rich company based in Johore. This is one company with a lot of lands that has not been revalued for over a decade or even longer than that.

Surprisingly, this Malaysian company is not majority owned by Malaysians, rather by three siblings from our "kiasu" neighbours, Singapore. I am really piqued how these three Singaporean siblings are able to own Keck Seng. There seemed to be no history or story about this as I could not find from any articles.

The three siblings, Ho Kim Swee (Executive Chairman), Dato' Ho Cheng Chong (Managing Director) and Ho Eng Chong ((Non-Executive Director) have been the "captains" of Keck Seng since more than several decades.

The three are not young anymore. Kim Swee is 70, Cheng Hong 68 and Eng Chong 65 know that time to managing Keck Seng is running out. How many more years can they hang on?

At the most, yours truly would give it a time frame of between five to ten years. Then whom do you think would be the new "captains" of Keck Seng?

If one is to read its 2014 Annual Report carefully, one is likely to find its clue there. Three of their sons and one nephew are sitting in the Board of Directors.

The nephew, Chan Kui Ming 45, is the Executive Director. The three sons, Ho Chung Kain 40 and Ho Chung Hui 39 are sons of senior Ho Kim Swee while Ho Chung Tao 41 is the son of Ho Kim Swee. These three sons  play the role as alternate Director.

In my opinions, these four are most probably likely to be next "new" group of captains of Keck Seng. Only time will tell if my prediction will be right or not. And I personally feel I should be also be spot-on this time.

Should my prediction be proven right, how will these new group of "young" chiefs  manage Keck Seng? Will it follow their seniors' style (China-man style as some commented) or will it be a new dawn for Keck Seng?

These "new" four juniors are also most probably educated in overseas unlike their peers and are more exposed in their thoughts. As such, there might be new changes in the direction of Keck Seng when the time comes.

Mind you, the present seniors have done a good job although not all will agree with it. Those who had kept Keck Seng shares (very patiently) for more than ten years ago would have seen their investment became free with the usual 8 to 10 sen consistent dividends over the period.

Not only that, Keck Seng has also done well in its investments in securities, notably realising a huge bumper profit from its investment in Parkway shares for a profit of RM260 million just a few years back.

The market had then anticipated that Keck Seng would distribute this windfall of almost 95 sen per share to its shareholders. But somehow, the  management must have thought differently and it became a BIG DISAPPOINTMENT to its shareholders. (I wrote about that on December 21, 2013, the title : When the drum stops beating for Keck Seng).

As a result of its good investments in securities and a bit of land sale to the government, Keck Seng has seen its cash ballooning over the years.

The 2014 Annual Report stated that its cash is RM972 millions (comprising  cash at bank : RM117, money market : RM186, deposit with licensed banks : RM457 and foreign financial institutions : RM223) millions respectively.

There are RM424 millions from its investment is securities (comprising quoted in Malaysia : RM155 and quoted outside Malaysia : RM268) millions respectively.

Keck Seng also has stakes in other listed companies, one of it is cash rich plantation company, Chin Teck Plantations Berhad (Chin Teck).

The latest 2014 Annual Report of Chin Teck showed that Keck Seng is the 6th largest shareholder with a 3.05% stakes or 2,784,375 shares.

Keck Seng must be holding onto "that" position in Chin Teck since more than a decade ago or even longer.

Till today, Keck Seng has also been very reluctant to even revalue its land bank (which some of not been revalued since decades ago). Revaluing its land bank at current time would have surely heighten up interest in this stock.

If it decides to do so, surely Keck Seng's current depressed share price of just over RM5 (compared to its near two year high of RM7.97 on Nov 4, 2013) would have seen some appreciation.

But wait, this is unlikely to happen anytime soon. The current management of Keck Seng are just contended with Keck Seng at the moment and are most probably happy with it.

Perhaps in the next decade, when that "anticipated" set of new management takes over then we might see some kind of new excitement play in Keck Seng? Until then, we just have to wait patiently .....

As one blogger of iinvestor.com by the name of prudentinvestor posted : Invest in Keck Seng only if you are extremely patient and have the holding power.

Incidentally, do you know of any investors who have been holding onto Keck Seng shares for more than 10 years? If you are one, I would be more than happy to know.

I believed I knew one investor who fits perfectly into that category. This investor has been holding onto her original 1,000 shares (now 1,500 shares) of Keck Seng since Nov 2, 1999. That is more than 15 years already!

This investor is the spouse of yours truly!