Yesterday, my sister-in-law Whatsapped me. She asked, should I sell HOVID share now? I said, since you have already earned good profit, why not? Just make sure you have another stock to buy. Otherwise, that HOVID is worth keeping for a while more. 2014 and beyond would be a good year. Then, she said oh, if that’s the case, how high can it go? I laughed and said, if I can know, then do you think I still need to work full time? She laughed too. Honestly, no matter what investment we do, as long as we have earned a good profit, we can always sell and then invest in something else. Typically, if I sell some shares, I would buy another share.
Then, today I read about shares of Guocoland jumping up suddenly because it announced a slew of new developments worth RM2.5 billion. I do not know much about Guocoland. However, one friend said before that Guocoland is a good developer. Most of its launchings are sold out. Besides that, Guocoland also have a huge land bank. It has 4,046ha in Petaling Jaya, Rawang, Cheras and Sepang. In Jasin, Malacca it owns another 1,618 ha. Let’s assume Guocoland is a good company. However, should the share price jump with just an announcement? Think objectively, how fast can this announcement can be turned into sales. How fast can they build the project, handover and get the gross profit for the project? I think you have the answer. If you intend to hold this stock because of its attractive PER or you are a long term investor, then perhaps it’s a good buy. However, if it is purely because everyone’s buying, I think the rationale is incorrect. You may be lucky a few times, buy early, sell quickly but no one can be lucky forever.
My advice to my sister-in-law remains the same. Research the company. Understand its business. Know its management team. Buy stocks which are undervalued because it has no speculative properties. Most of the time, you would need to hold for a while but if the company is turning in profits, the rise in share price is certain. If the rise in share price is because of any other speculative reasons, then good luck. I wish you the best. I seldom buy the typical blue-chips. I will research and find my own blue chips to buy. Most of the time, a sound business and the company having little or no debts. Only problem, it does not go up fast……. Oh yeah, my sister-in-law will start reading The Edge for more business knowledge beginning this week. She’s a fresh graduate entering the workforce.
written on 31 July 2014
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