Buy because of the business, that’s safer.

There was an article in TheStar: A fed up TS Wong sells stakes in Palette and MUI to quell speculation which tells of how shares of some companies shot up because of some reports of POTENTIAL news related to someone well known who happened to own some shares in those companies. TS Wong released this statement, “I acquired insubstantial shares in MUI and Palette as passive investments. Unfortunately, certain media quarters have extracted these information from the annual reports and published stories that created the misperception of impending merger and acquisition activity. I wish to clarify that I have disposed of all my shareholding in MUI and Palette and will refrain from making any passive investments in listed equities in the future.” Full article in TheStar here. Well, after the clarification, the share prices have since started normalising. To the earlier buyers of those shares, if they had sold for profit, they would have gained. To those who bought towards the tail end before the clarification, well, they would have lost money. A company can do badly but can recover after restructuring internally for example and this would usually show in the next one or two financial years. It should not suddenly profit this quarter and then lose almost all of its profits next quarter.

Even though I love properties, it is very hard for me to buy one every few years. The reason is because I am just a working professional like the majority of Malaysians. ( I have no tricks whatsoever on how to buy a property every year or even a few properties within the same year. I do not wish to learn these too) What do I do before the next property? I try to keep it safe, some goes to unit trust, some goes into stocks. For stocks, it is almost a certainty that I only buy those with dividends nowadays. I am still a beginner but here’s someone who’s an expert. One of Warren Buffett’s famous line is this. ““Never invest in a business you cannot understand.” What this tells us is that buying shares in a company is not that hard but we should understand what it does. If we do not, then we are exposing ourselves to higher risks than needed. There are many books and articles written about Warren Buffet. Whether it was endorsed by him or not by him does not really matter. He is one of the most successful investor in the stock market, ever. As per google (image), his net worth is now US$79 billion. I think this is bigger than the GDP of some small nations. How about learning some of his ideas about stock market investing then?

Another awesome statement from Warren Buffett. “It’s far better to buy a wonderful company at a fair price, than a fair company at a wonderful price.” What this tells us is that a good company will be a good buy, especially during bad times because it would be undervalued then; the business versus the share price. A so-so company which has dropped a lot but suddenly have some huge potential investor is really not worth the gamble. It is either gain a lot or lose money. Examples abound but of course, greed is usually the ‘haze’ surrounding our logic.

One last one before we end. The hardest one to do, actually. Haha. “If you aren’t thinking about owning a stock for 10 years, don’t even think about owning it for 10 minutes.”  Study a company enough. I would usually look at the management profile as well. A family business may still be a great company ok. It depends on whether it is professionally run. I have not been buying companies with huge debts. I know, without lots of debts, sometimes it may be growing slowly. Just my choice. Big names mean nothing because sometimes when we look at their Balance Sheet, we realise that the only thing left would be its brand. I still prefer property over stocks. Haha. Happy investing. Here’s some real tips from a stock expert.

written on 14 Nov 2017

Next suggested article: Easy to follow stock investments – super-rich suddenly not possible, ok

2 thoughts on “Buy because of the business, that’s safer.

  1. Buying a property every year or one every few years?

    I heard that many times. Most of these people are speculators and mostly, members of property clubs. What is the difference between these people and people who own shares? A shareholder is also a owner of assets and even properties! Many of these members of property clubs shamelessly declare they bought properties every year or every few years. First, they just own some shares of a property not outright sole proprietors. These members form companies to purchase the properties. The principle is using collective strength to purchase assets and properties. The persons who initiate these clubs are the biggest beneficiaries not their members who are merely suckers.

    So you too own shares of different counters, does that mean you are owners of many companies and even their properties? Sounds hinky?

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