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Wednesday, February 17, 2016

The Stock Investing Approach of Mr. Koon Yew Yin - Some Observations (Part 1)

The Stock Investing Approach of Mr. Koon Yew Yin - Some Observations (Part 1)

Author: fast | Publish date: Wed, 17 Feb 2016, 12:23 PM

A malaysian, Mr. Koon Yew Yin (KYY) has made a lot of wealth from investing in stock. Personally I have read a lot about Warren Buffett, Benjamin Graham, malaysian "Cold Eye", and etc., I think it's good for us to evaluate objectively about the investing approach of KYY, probably learn something useful from him. A lot of my writings are taken from hispublic articles, comments, and other people comments.

Some background information of KYY:

KYY was a founder of IJM, Gamuda and Mudajaya. He gave Dato Lin Yun Ling, Gamuda CEO, Ng Ying Loong, former Mudajaya CEO and Dato Richard Fong, Glomac Dy Chairman their first employment. He is a Chartered Civil Engineer and he was a member of the Malaysian Board of Engineers and SIRIM for drafting the Malaysian Standards for Cement and Concrete , the highest professional achievement for any Engineer. He was the Secretary General of the Malaysian Master Builders Association for 9 years when Tan Sri Yeoh Tiong Lay was the President. Fobes selected him as one of the 4 philanthropists from Malaysia. Now he is a member of the Penang Institute, an advisory think tank for the Penang Chief Minister and also a member of the Penang Future Foundation. He has interviewed hundreds of engineers, lawyers, accountants, and etc.

His article dated 5 Nov 13:
He pointed out that by looking merely at current PE and current earnings of a company is not sufficient to evaluate the profit growth potential; as a result, many people miss out to buy companies with profit growth potential. He argued that this kind of investors cannot outperform the market index because of shortsighted. He showed that in Nov 2013 all plantation companies show poor current earnings and many people are not interested to buy them, as a result the prices of plantation companies are so cheap. He further illustrated that it takes time for plantation industries to produce meaningful profits for shareholders (can take more than 7 years from the time of forest clearing).

He strongly recommended Jaya Tiasa in this article because he believed Jaya Tiasa has explosive profit growth prospect. He said because of poor current PE of Jaya Tiasa, the price (at that time) has been depressed for more than a year, he believe it's a good time to buy it.

His article dated 12 Nov 13:

He said more than 80% of day traders lose money due to transaction costs and poor share selection based on hot tips. He claimed that the most frequent mistake of them is 'loss aversion', a psychological obstacle of them. He argued that in his opinion, a good stock must be 'undervalued and with good profit growth prospect'. He will not buy a stock which does not have this quality, but a stock with solid evidence of value and not on the basis of tips.

As stated by him "After you have bought some stock that you think can perform well, you will have to decide when and which stock to sell."

He said it's a mistake to sell the good stocks to lock in profit early but retain those that are not performing. He said some people regret this action and later even jump back to buy back the stock they just sold with a even higher price than the price they sold previously. And some people just watch the stock they sold go higher and higher.

He illustrated that it is wrong to hold losing investment for longer than we should. It is important to admit our own mistake of picking the wrong stock and sell as fast as possible. In the end of the article, he said the time to sell the stock is when the reasons you bought the share are no longer valid.

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