My one and only criterion for buying shares

by Koon Yew Yin, 20th July 2011

As you know, there are many investment books written about the methods used by Gurus, like Warren Buffet, Benjamin Graham, Peter Lynch and many others. After reading and mastering all the basic fundamentals on share selections, I thought I could make money from the stock market. It is not so easy.

After learning from my own mistakes, now I have one and only one criterion for stock selection, that is to buy only shares that have profit growth prospect. I will never buy any share if I am not sure that it will make more profit in the next few quarters and also better profit this year than last year. Of course you should only buy the shares with P/E ratio below the average P/E of the sector and when the increased profit is announced the shares you have bought will look cheap.
If you look at the first quarter results of plantation stocks, you will notice that almost all of them have made more profit than the corresponding quarter of last year. Moreover, you can see that the average selling price of CPO was around Rm 2,600 per ton and average CPO price has been above Rm 3,000 for this year. You can also see in the Star daily that the CPO price for the next few months is above Rm 3,100 per ton. Basing on these information you can safely assume that almost all plantation companies will make more profit this year than last year.

Now you can be almost sure that you will make money if you buy plantation shares. Of course, the best buy would be those with low P/E ratio which you can see in the Star or NSTP daily.

I am obliged to tell you that plantation stocks form a significant portion of my investment portfolio. I am not asking you to buy plantation shares. But if you decide to buy, you are buying at your own risk and I am not responsible of your profit or loss.

Good luck! LUCK is when preparation meets opportunity.

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3 Comments

  • qbplay

    Reply Reply August 17, 2011

    PE Ration sounds useful. But while I am able to find the PE ratio for companies, where do I get the industry average PE ratio? Also I read elsewhere that they use 19x, 2x etc for PE ratio. How do I interpret that?

  • Woon Lip Fuey

    Reply Reply August 19, 2011

    People always said do your homework first before invest your money in the stock market, I really wonder how the homework is conducted? What kind of homework is that? What is the procedure and where to begin? However, thanks for sharing, you are right, recently I read a book the author keep reminding us to choose a company which able to generate profit to invest. Because the core of listing company is to maximize shareholder’s fund, invest in company which generate loss is a wrong way of conducting an investment.

  • Jackson MMA

    Reply Reply March 17, 2012

    I’m just getting started in reading a book by Bill Wermine’s and Martin Wong’s “Dividends Don’t Lie”… (“,)

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