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Thursday, February 18, 2016

The Stock Investing Approach of Mr. Koon Yew Yin - Some Observations (Part 2)

The Stock Investing Approach of Mr. Koon Yew Yin - Some Observations (Part 2)
Author: fast | Publish date: Thu, 18 Feb 2016, 04:42 PM

His article dated 16 Jan 14:

Investors must look for businesses that they could understand because they have to be able to make an educated guess about the future earnings. If the business is more complex, then the more uncertain of the profit projections. Simple businesses also have an advantage, as it's harder for incompetent management to make big mistake.
Value investors want managers who act like shareholders. They focus on growing the business, thus creating long-term value. If the managers are acting like employees, they will focus on short-term goals in order to secure a bonus or other performance perk, sometimes to the long-term detriment of the company. If they're thinking like shareholders, they will pay themselves reasonable wages and depend on capital gains in their shares.

KKY argued that it is not possible to keep track with too many stocks of different type of businesses. He suggested not to own more than 5 stocks. He said value investors must not worry about the possible next market crash. Because after the market crash, we will have the opportunity to buy undervalued stocks. He said if you bought the shares like buying a business, you will want to hold onto them as long as the fundamentals are strong. A long-term investor does not buy and sell frequently. But if the reasons to buy are no longer valid, then you must sell and do not fall in love with your stocks.

His article dated 20 Jan 14:

In this article he tried to lay out the reasons for buying a lot of shares of Jaya Tiasa. He viewed Jaya Tiasa as a businessman and think it is undervalued by using simple business logic. Jaya Tiasa has a total planted area of 62800 ha which has an open market value of more than twice of its market cap (at that time). Moreover its plywood and timber business have competitive advantage because it has a large forest reserve.

He said instead of buying TSH, KLK, UP, IOI and SOP, he chose Jaya Tiasa because nobody want them (at that time) and it is safer to buy it cheap. Later he said he and his associate bought SOP 20m shares in 2011 at below RM3, later they sold SOP above RM6 and switch to Jaya Tiasa. His friend, Alvin Tai (CFA from RHB research) said palm oil price will continue to go up for many more years.

A point could be concluded in this article, that is KYY looks at a particular industry, i.e. plantation industry in this case. He avoided high flying stocks like IOI and TSH, and concentrated on low PE one like Jaya Tiasa in this case. Same case for VS Industry, he avoided MPI and concentrated in VS (for electronic industry).

His article dated 25 Jan 14:

Again, he listed the reasons to buy Jaya Tiasa. Jaya Tiasa FFB production is projected to increase rapidly in the next few years. KLK, UP, SOP, TSH etc. are no longer cheap and their FFB production rate of increase will be slower compared to Jaya Tiasa.

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